SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                 THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

For the fiscal year ended July 31, 2003           Commission File Number 0-12927

                        NATIONAL HOME HEALTH CARE CORP.
             (Exact name of Registrant as specified in its charter)

            Delaware                                       22-2981141
 (State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                          Identification No.)

700 WHITE PLAINS ROAD, SCARSDALE, NEW YORK                      10583
--------------------------------------------------------------------------------
(Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code: 914-722-9000

Securities registered pursuant to Section 12(b) of the Act:  None

Securities  registered  pursuant to Section 12(g) of the Act: Common Stock,  par
value $.001 per share.

Indicate  by check  mark  whether  the  Registrant:  (1) has filed  all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934,  as amended,  during the  preceding 12 months (or for such shorter  period
that Registrant was required to file such reports),  and (2) has been subject to
such filing requirements for the past 90 days. Yes  X   No
                                                   ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge in definitive  proxy or information  statements,
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2). Yes     No  X
                                                ---

As of January 31, 2003,  the  aggregate  market value of the Common Stock of the
Registrant,  its only class of voting securities,  held by non-affiliates of the
Registrant was approximately $28,700,830, calculated on the basis of the average
of the closing bid and asked prices of such stock on the National Association of
Securities  Dealers Automated  Quotation System on that date, as reported by the
National Association of Securities Dealers, Inc.

The number of shares outstanding of the Registrant's Common Stock on October 28,
2003 was 5,496,188.

Certain  information  to  be  included  in  the  Registrant's  definitive  proxy
statement,  to be filed not later than 120 days after the end of the fiscal year
covered by this report, for the Registrant's 2003 Annual Meeting of Stockholders
is incorporated by reference into Part III of this annual report on Form 10-K.


<PAGE>


                                TABLE OF CONTENTS

                                                                           Page

Cautionary Statement.........................................................iii

                                     PART I

Item 1.  Business..............................................................1
Item 2.  Properties...........................................................15
Item 3.  Legal Proceedings....................................................17
Item 4.  Submission of Matters to a Vote of Security Holders..................19

                                  PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder
                Matters.......................................................20
Item 6.  Selected Financial Data..............................................21
Item 7.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...........30

Item 8.  Financial Statements and Supplementary Data..........................30
Item 9.  Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure.......................................30
Item 9A. Controls and Procedures..............................................30

                                    PART III

Item 10. Directors and Executive Officers Of the Registrant...................31
Item 11. Executive Compensation...............................................31
Item 12. Security Ownership of Certain Beneficial Owners and Management.......31
Item 13. Certain Relationships and Related Transactions.......................31
Item 14. Principal Accountant Fees and Services...............................31


                                     PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....31

Signatures....................................................................33
Exhibit Index.................................................................34
Exhibit 3.4 - Amendment to Article III, Section 3 of By-Laws.
Exhibit 10.14 - Audit  Committee  Charter  adopted July 17, 2003
Exhibit 10.15 - Code of Ethics  as of  October  23,  2003
Exhibit  21.1 - Subsidiaries  of the Registrant
Exhibit 23.1 - Consent of Independent Auditors
Exhibit 31.1 - CEO Section 302 Certification
Exhibit 31.2 - CFO Section 302 Certification

                                      -i-
<PAGE>

Exhibit 32.1 - CEO Section 906 Certification
Exhibit 32.2 - CFO Section 906 Certification























                                      -ii-
<PAGE>



CAUTIONARY STATEMENT

Except for historical information contained in this report on Form 10-K, certain
matters set forth herein are forward-looking statements that are dependent on
certain risks and uncertainties, including such factors, among others, as market
acceptance, pricing and demand for the Company services, changing regulatory
environment, changing economic conditions, risks in connection with
acquisitions, ability to attract and retain qualified personnel, ability to
manage the Company's growth, and other risks detailed in the Company's other
filings with the Securities and Exchange Commission. In particular, in addition
to the specific regulatory matters described herein, the Company generally, as a
participant in the home health care industry, is subject to extensive federal,
state and local regulations. There can be no assurance that any of these
regulations will not change from existing standards, that additional standards
will not be imposed nor that the Company will not experience adverse effects as
a result of efforts to comply with applicable standards, which are extensive,
complex and often-changing.








                                     -iii-
<PAGE>



                                     PART I

ITEM 1.    BUSINESS.

GENERAL

         National  Home  Health  Care  Corp.   (the  "Company")  is  a  Delaware
corporation  which was  incorporated  in 1983 and completed  its initial  public
offering that year. Formerly Family Treatment Centers of America,  Inc. and then
National HMO Corp., in 1991 the Company changed its name to National Home Health
Care Corp.  The Company is a provider of home health care and staffing  services
in the Northeast region.

         The Company has seven principal operating subsidiaries:

         o Health Acquisition Corp.,  formerly Allen Health Care Services,  Inc.
("Allen Health  Care"),  a New York  corporation  that conducts home health care
operations in New York.

         o  New  England  Home  Care,  Inc.  ("New   England"),   a  Connecticut
corporation that conducts home health care operations in Connecticut.

         o  Accredited  Health  Services,  Inc.  ("Accredited"),  a  New  Jersey
corporation that conducts home health care operations in New Jersey.

         o  Connecticut  Staffing  Works  Corp.   ("Connecticut   Staffing"),  a
Connecticut   corporation  that  conducts   healthcare  staffing  operations  in
Connecticut.

         o  Impressive  Staffing  Corp.  ("Impressive  Staffing"),  a  New  York
corporation that conducts healthcare staffing operations in New York.

         o New Jersey Staffing Works Corp. ("New Jersey Staffing"), a New Jersey
corporation that conducts healthcare staffing operations in New Jersey.

         o Medical Resources Home Health Corp. ("Medical Resources"), a Delaware
corporation that conducts home health care operations in Massachusetts.

         In  January  1996,  the  outpatient  medical  service  business  of the
Company,  formerly known as Brevard Medical Center, Inc. and First Health, Inc.,
was  reorganized  as  SunStar  Healthcare,  Inc.  ("SunStar"),  a  newly-formed,
wholly-owned  subsidiary  of the Company.  In May 1996,  SunStar  completed  its
initial public  offering (thus  reducing the Company's  ownership  percentage in
SunStar to  approximately  37.6%)  following a complete change in management and
the adoption of a business plan by new  management  for the  establishment  of a
health maintenance organization. As a result, SunStar was no longer consolidated
with the Company for  accounting  purposes  and the  Company  accounted  for its
investment in SunStar using the equity method of  accounting.  During the fiscal
year ended July 31, 1998,  the  Company's  ownership  percentage  in SunStar was
reduced to 30.5% as a result of the issuance by SunStar of additional  shares of
its common stock pursuant to a private  placement.  In February 2000,  SunStar's
sole operating subsidiary effectively  discontinued


<PAGE>

operations.  As of July 31, 2003, the Company's ownership  percentage in SunStar
was 21.6% and the Company's value of its investment in SunStar was $0.

         Health Acquisition Corp. d/b/a Allen Health Care Services. Allen Health
Care is a provider  of personal  home  health  aide  services in New York State.
Services are provided by personal care aides,  home health aides and  homemakers
(collectively, "caregivers"). Allen Health Care is licensed by the Public Health
Council  of the  State of New York  Department  of  Health.  Allen  Health  Care
maintains  its  principal  administrative  office in  Jamaica,  New York and has
branch offices in Lindenhurst and Mount Vernon,  New York. Case  coordinating of
patients is  performed  at these three  offices.  In  addition,  the company has
satellite offices in Brooklyn,  Hempstead and the Bronx, New York. The satellite
offices  are  primarily  used for the  recruitment  and  training of home health
aides. Services are provided in the following counties in the State of New York:
Nassau, Suffolk, Westchester, Queens, Kings, New York and the Bronx.

         Home health care personnel are licensed or agency certified under a New
York State  approved  program and can be engaged on a  full-time,  part-time  or
live-in  basis.  Since  July  1996,  Allen  Health  Care has  required  criminal
background investigations for all new personnel. In addition, urine drug testing
is part of the pre-employment screening process and thereafter is performed both
annually and randomly.  In March 2002,  Allen Health Care was re-surveyed by the
Joint  Commission of Accreditation of Health Care  Organizations  ("JCAHO"),  an
accrediting  body for health care providers.  JCAHO  accreditation is associated
with  providing  quality  services.  This  status  is  required  by  many of the
certified home health care agencies that Allen Health Care  currently  services.
The  re-survey  resulted in Allen Health Care  extending its  accredited  status
through the year 2005.

         Allen Health Care is reimbursed primarily by certified home health care
agencies  ("CHHAs") and long-term health care provider programs that subcontract
their  patients  to Allen  Health  Care,  as well as by  private  payors and the
Nassau, Suffolk and Westchester Counties Departments of Social Services Medicaid
Programs, for which Allen Health Care is a participating provider.

         Allen  Health Care  provides  home health aide  services to its clients
twenty-four  hours per day,  seven days per week.  Although  Allen Health Care's
offices  are  open  during  normal  business  hours,   personnel  are  available
twenty-four hours per day to respond to emergencies and to provide other service
requests.  The  registered  nurses of Allen Health Care, in accordance  with New
York State  Department of Health  regulations and contract  requirements,  visit
patients  regularly and review  records of service  completed by the home health
aide and  personnel  care aides daily.  These  records are  maintained  by Allen
Health  Care.  In addition,  a home care  coordinator  ensures that  appropriate
coverage is  maintained  for all patients  and acts as the liaison  among family
members, aides and professional staff.

         Allen  Health  Care has  expanded  in  recent  years  through  selected
acquisitions  of  complementary  businesses or assets in its geographic  region.
These  acquisitions  included the August 1998  acquisition  of certain assets of
Bryan  Employment   Agency,   Inc.,  d/b/a  Bryan  Home  Care  Services  ("Bryan
HomeCare"),  a New York  licensed  home health care  agency that  provided  home
health aide services in Westchester County, New York. This acquisition  expanded
the



                                      -2-
<PAGE>

geographic   presence  of  Allen   Health  Care  and  enabled  it  to  become  a
participating  provider in the Westchester  County Department of Social Services
Medicaid Program.

         To a large extent,  Allen Health Care's  continued  growth  depends on,
among other  things,  its ability to recruit and maintain  qualified  personnel.
Allen Health  Care's  training  programs for home health aides and personal care
aides have been  approved  by the New York  State  Department  of Health.  Allen
Health Care believes that it offers competitive salaries and fringe benefits and
has been able to keep its caregivers working on a steady basis.

         New England Home Care,  Inc. In August 1995,  the Company  acquired New
England.  New  England is a Medicare  certified  and  licensed  home health care
company in Connecticut.  In November 2001, New England was re-surveyed by JCAHO,
resulting in New England  extending its  accredited  status  through  2004.  New
England  provides  services  throughout  Connecticut.  Services  include skilled
nursing,  physical therapy,  occupational therapy, medical social services, home
health aide and homemaker services. In addition,  New England provides specialty
services consisting of adult/geriatric,  pediatric,  post-acute  rehabilitation,
behavioral medicine and maternal/child health. New England provides full-service
home  health  care  twenty-four  hours per day,  seven days per week.  Weekends,
holidays and  after-hours  are  supported  by an on-call  system for each office
location with medical  supervision by a registered  nurse at all times. All home
health care  personnel  are  licensed or agency  certified  under a  Connecticut
state-approved  program and can be engaged on a full-time,  part-time or live-in
basis. Since 1995, New England has performed criminal background  investigations
on all new personnel.

         New England maintains its principal  administrative  office in Milford,
Connecticut.  In addition,  New England has administrative  offices in Cromwell,
West Hartford and Waterbury and satellite offices in Norwalk,  Hamden,  Danbury,
Hartford,  Norwich and Guilford,  Connecticut.  Case coordinating of patients is
performed at the Milford,  Cromwell, West Hartford and Waterbury  administrative
offices.  The  satellite  offices  are used as drop-off  offices for  paperwork,
recruitment,  in services and  orientation of personnel.  Reimbursement  for New
England's services is primarily provided by the State of Connecticut  Department
of Social Services Medical Care  Administration,  the Federal Medicare  Program,
managed care companies,  private payors,  hospices and other Medicare  certified
home health  agencies  and  long-term  care  providers  that  subcontract  their
patients to New England.

         New England has expanded its operations  through increased  penetration
of market share in Connecticut and selected acquisitions of complementary assets
in its geographic  region. In November 1999, New England acquired certain assets
of  Optimum  Care  Services  of  Connecticut,   Inc.,  Optimum  Home  Health  of
Connecticut, Inc. and Optimum Home Care of Connecticut, Inc. (collectively,  the
"Optimum  Entities").  The Optimum  Entities  included a Medicare  certified and
licensed home health care company engaged in providing home health care services
in  Connecticut.  The assets  were  acquired  from a  court-appointed  Chapter 7
trustee.  The  acquisition  of  these  assets  was  coupled  with  a  successful
penetration of the market share made available as a result of the liquidation of
the Optimum Entities.

         In April 2000, New England  acquired  certain assets of the Connecticut
operations of U.S.  HomeCare  Corp.  ("U.S.  HomeCare-Connecticut"),  a Medicare
certified and licensed home health care company engaged in providing home health
care  services  in  Connecticut.  The  acquisition  complemented  the  Company's
existing operations in Connecticut.



                                      -3-
<PAGE>

         In March 2003, New England  acquired  certain assets from  Professional
Relief Nurses,  Inc. ("PRN"), a Medicare certified and licensed home health care
company engaged in providing home health care services. PRN provided home health
care  services  in  Hartford,  Litchfield,  New  Haven and  Middlesex  Counties,
Connecticut.

         The continued growth of New England depends on, among other things, its
ability to recruit  and  retain  qualified  personnel.  New  England's  training
program  for  home  health  aides  has  been   approved   under  a   Connecticut
state-approved  program. New England primarily recruits nurses through newspaper
advertisements.  New England  believes that it offers  competitive  salaries and
fringe  benefits  and has been able to keep its  employees  working  on a steady
basis.

         New England, as a participant in the Medicare and Medicaid programs, is
subject to survey and audits of operational, clinical and financial records with
respect to proper applications of general regulations  governing  operations and
billing  of claims.  These  audits can  result in  retroactive  adjustments  for
payments  received from these programs  resulting in amounts due to governmental
agencies.

         Connecticut Staffing Works Corp.  Connecticut Staffing was organized in
October  1999 to  operate  certain  of the  assets  acquired  from  the  Optimum
Entities.  Connecticut  Staffing is a full-service health care staffing company.
It provides temporary staffing to hospitals,  skilled nursing  facilities,  home
health organizations, schools and other institutions. Staffing personnel include
registered nurses, licensed practical nurses, certified nursing assistants, home
health aides, homemakers,  opticians,  medical secretaries and emergency medical
technicians.  The  company  maintains  its  administrative  office in  Cromwell,
Connecticut.  Staffing  services are provided  twenty-four  hours per day, seven
days per week.  Staffing  coordinators  are  available  in the office  Monday to
Friday 6:00 a.m. to 7:00 p.m.  Weekends,  holidays and after hours are supported
by an on-call system which pages a staffing coordinator.

         The company maintains a roster of quality professional  personnel.  The
continued  success of Connecticut  Staffing is dependent on, among other things,
its ability to maintain  its steady  roster of per diem  workers for meeting the
staffing  requirements  of its  clients.  The  company  believes  that it offers
competitive salaries and fringe benefits and has been able to keep its personnel
working on a steady basis.

         Accredited Health Services,  Inc. In October 1998, the Company acquired
Accredited. Accredited is a licensed home health care company that provides home
health aide services in Bergen, Hudson,  Passaic, Essex, Morris, Union, Somerset
and  Middlesex  Counties,   New  Jersey.   Accredited  maintains  its  principal
administrative  office in  Hackensack,  New  Jersey  and has a branch  office in
Verona,  New Jersey.  Case  coordinating  of patients is  performed  in both the
Hackensack and Verona offices.

         Accredited   provides   home  health  care   services  to  its  clients
twenty-four  hours  per  day,  seven  days  per  week.  Weekends,  holidays  and
after-hours are supported by an on-call system for each office.  All home health
aides are licensed under a New Jersey state-approved  program and can be engaged
on a  full-time,  part-time  or  live-in  basis.  In June 2003,  Accredited  was
re-surveyed by the Commission on Accreditation for Home Care (CAHC),  one of the
accrediting  bodies  required for  participation  as a Medicaid  provider in New
Jersey.  This  accreditation was extended for an



                                      -4-
<PAGE>

additional year.  Reimbursement  for  Accredited's  services is primarily by the
state of New Jersey  Medicaid  Program,  Medicare  certified  home  health  care
agencies that subcontract their patients to Accredited and private payors.

         In August 2000,  Accredited completed the acquisition of certain assets
of Health Force Owned, Ltd. and its affiliates. The acquisition complemented the
Company's existing operations in New Jersey.

         In December  2002,  Accredited  completed  the  acquisition  of certain
assets of Mary Baker's Health Care Services,  Inc.  ("Mary  Baker").  Mary Baker
provided home health care services in Bergen and Passaic Counties, New Jersey.

         Accredited's  growth  depends on,  among other  things,  its ability to
recruit and retain  qualified  home health aides.  The company  believes that it
offers  competitive  salaries and fringe  benefits and has been able to keep its
home health aides working on a steady basis.

         Impressive Staffing Corp.  Impressive Staffing is a full service health
care and clerical staffing company which commenced  operations in February 2002.
It provides temporary staffing to hospitals, nursing facilities and radiological
facilities.  Staffing personnel include  registered  nurses,  licensed practical
nurses,  x-ray  technicians,  MRI  technicians,  operating room  technicians and
clerical  personnel.   The  company  maintains  its  administrative   office  in
Hempstead,  New York. Staffing services are provided  twenty-four hours per day,
seven days per week. Staffing coordinators are available in the office Monday to
Friday 8:30 a.m. to 5:00 p.m.  Weekends,  holidays and after hours are supported
by on-call coordinators.

         The company maintains a roster of quality professional  personnel.  The
growth of Impressive  Staffing is dependent on, among other things,  its ability
to increase  and  maintain a steady  roster of per diem  workers for meeting the
staffing requirements of its clients. The company believes it offers competitive
salaries and fringe benefits and has been able to keep its personnel  working on
a steady basis.

         New Jersey  Staffing Works Corp.  New Jersey  Staffing is licensed as a
health care service firm by the Division of Consumer  Affairs of the  Department
of Law and  Public  Safety  of the  State of New  Jersey.  New  Jersey  Staffing
commenced operations in September 2002 and offers a full complement of temporary
nursing and  paraprofessional  services to  hospitals,  nursing  homes,  clinics
assisted living  facilities,  correctional  facilities and other institutions in
northern  and  central  New  Jersey.   New  Jersey  Staffing  personnel  include
registered nurses,  licensed practical nurses and certified nursing  assistants.
The company  maintains  its  administrative  office in  Hackensack,  New Jersey.
Staffing  services are provided  twenty-four hours per day, seven days per week.
New Jersey  Staffing  coordinators  are available in the office Monday to Friday
from 7:00 a.m. to 5:30 p.m. Weekends,  holidays and after hours are supported by
an on-call system.

         The company maintains a roster of quality  professional  personnel that
are interviewed,  screened and monitored for proper credentials under guidelines
established by leading accredited health care organizations.  The success of New
Jersey  Staffing is dependent on, among other things,  its ability to maintain a
steady roster of per diem workers for meeting the staffing  requirements  of its



                                      -5-
<PAGE>

clients.  The company  believes that it offers  competitive  salaries and fringe
benefits and has been able to keep its personnel working on a steady basis.

         Medical  Resources  Home Health Corp. In September  2002,  the Company,
through a wholly-owned subsidiary, acquired certain assets of Medical Resources,
Inc. and related entities (collectively,  the "Medical Resources Entities"). The
Medical Resources Entities provided home health care services in Massachusetts.

         The  Massachusetts   State  Home  Care  Program  provides  services  to
approximately  33,000 frail,  low income elders  throughout the state. The funds
and  services are managed  through  twenty-seven  Aging  Service  Access  Points
("ASAPs")  that  are  not-for-profit   organizations   geographically  dispersed
throughout  the state.  Services  provided  through this state  program  include
homemaking,  personal care, chore, companion and shopping. Medical Resources has
contracts  with certain of these ASAPs to provide  homemaking  and personal care
services  as well as  grocery  shopping  and  delivery  services.  Services  are
provided twenty-four hours per day, seven days per week. Weekends,  holidays and
after-hours are supported by an on-call system for each office.

         Medical  Resources  maintains  its principal  administrative  office in
Newton,  Massachusetts  and has satellite offices in Boston,  Lynn,  Framingham,
North Andover, Leominster,  Worcester, Chicopee, Bellingham, North Dartmouth and
Easton, Massachusetts.  Case coordinating of patients is performed in Newton and
the satellite  offices.  The satellite offices are also used as drop-off offices
for  paperwork,  recruitment,  in  services,  training  and  orientation  of new
personnel.

         In April 2003,  Medical Resources  received its Medicare  certification
form the  Department  of  Health  and  Human  Services.  In June  2003,  Medical
Resources  received  its  Medicaid  provider  number  from the  Commonwealth  of
Massachusetts. As a result of receiving these certifications,  Medical Resources
expanded  its  services  to  include  nursing,  physical  therapy,  occupational
therapy,  speech therapy,  medical social services and home health aide services
to Medicare and Medicaid recipients.

         The growth of Medical  Resources  depends on, among other  things,  its
ability to recruit and retain staff as well as its ability to generate referrals
of  Medicare  and  Medicaid  patients.  The  Company  believes  that  it  offers
competitive salaries and fringe benefits and has been able to keep its personnel
working on a steady basis.

ORGANIZATION

         The Company's  corporate  headquarters  are located in  Scarsdale,  New
York, where all senior  corporate  administrative  functions are performed.  The
Company's operations are conducted by its seven operating subsidiaries. Although
the Company  maintains  separate  subsidiaries in its various  jurisdictions  of
operations,  it reviews its  operations  primarily on an integrated  rather than
geographic  or   separate-subsidiary   basis.   Each   subsidiary   has  a  main
administrative  office where all management functions are performed and overseen
by the subsidiary President. Each administrative office performs intake and case
coordinating of patients, corporate compliance,  human resources,  marketing and
all financial and accounting functions.



                                      -6-
<PAGE>

INSURANCE

         The  Company and its  subsidiaries  maintain  professional  malpractice
liability coverage on professionals employed in the rendering of health care and
staffing  services  providing  coverage per  occurrence and in the aggregate and
coverage  for the  customary  risks  inherent  in the  operation  of business in
general.  The Company also carries directors and officers  liability  insurance.
While the Company believes its insurance  policies are adequate,  in the wake of
the  terrorist  events of  September  11,  2001,  the  Company  has  experienced
substantial  increases in the cost of its insurance coverage. As a result, there
can be no  assurance  that  coverage  will  continue to be available in adequate
amounts or at a reasonable cost.

EMPLOYEES AND LABOR RELATIONS

         As of October 29, 2003,  the Company had  approximately  3,350 full and
part-time  employees,   of  whom  approximately  25  were  employed  in  various
management  capacities  and five  (5) were  employed  in  marketing  capacities.
Although the Company currently has no union contracts with any of its employees,
a majority of the  employees of Allen Health Care voted in favor of the American
Federation State,  County and Municipal  Employees  ("AFSCME")  District Council
1707 as their collective bargaining representative. Negotiations with that union
have been ongoing,  although the terms of any  collective  bargaining  agreement
have not  been  determined.  The  Company  believes  its  relationship  with its
employees  is  satisfactory.   The  Company  has  standardized   procedures  for
recruiting,   interviewing  and  reference  checking   prospective  health  care
personnel.  All nurses and home health  aides must be licensed or  certified  by
appropriate authorities.

RISK FACTORS

         This section  summarizes  certain risks,  among others,  that should be
considered by  stockholders  and prospective  investors in the Company.  Many of
these risks are discussed in other sections of this report.

If the  Company is unable to attract  qualified  caregivers  for its home health
care business at reasonable  costs,  it could  increase the Company's  operating
costs and negatively impact its business

         The Company relies  significantly  on its ability to attract and retain
caregivers who possess the skills, experience and licenses necessary to meet the
requirements of the Company's  customers.  The Company  competes for home health
care services  personnel with other providers of home health care services.  The
Company must  continually  evaluate and expand its network of caregivers to keep
pace with its  customers'  needs.  Currently,  there is a shortage of  qualified
nurses and a  diminishing  pool of home health  aides in the states in which the
Company conducts its business,  competition for nursing  personnel is increasing
and wages and benefit costs have risen. The Company may be unable to continue to
increase the number of  caregivers  that it recruits,  adversely  affecting  the
potential for growth of the Company's business. The Company's ability to attract
and retain  caregivers  depends  on several  factors,  including  the  Company's
ability to provide such caregivers with assignments that they view as attractive
and

                                      -7-
<PAGE>

with competitive wages and benefits.  There can be no assurance that the Company
will be successful in any of these areas. The cost of attracting  caregivers and
providing them with attractive  benefit  packages may be higher than the Company
anticipates and, as a result, if it is unable to obtain increased  reimbursement
rates, the Company's  profitability could decline.  Moreover,  if the Company is
unable to attract  and retain  caregivers,  the  quality of its  services to its
customers may decline and, as a result, it could lose certain customers.

         In  addition,  a majority of the  employees  of Allen  Health Care have
voted in favor of AFSCME District  Council 1707 as their  collective  bargaining
representative.  Negotiations  with that union have been  ongoing,  although the
terms of any collective bargaining agreement have not been determined. There can
be no assurance that the terms of any collective  bargaining  agreement will not
materially  increase  labor-related  costs or otherwise have a material  adverse
affect on the Company,  that further unionizing activity will not occur at other
subsidiaries  of the Company nor that any such activity will not have a material
adverse effect on the Company.

The Company operates in a highly  competitive  market and its success depends on
its ability to remain  competitive  in obtaining  and  retaining  referrals  and
caregivers

         The home  health  care  business  is  highly  competitive.  Some of the
Company's competitors,  unlike the Company,  provide pharmaceutical products and
other home health care services that generate additional referrals.  Some of the
Company's  competitors also may have greater  marketing and financial  resources
than the Company.  The Company believes that the primary  competitive factors in
obtaining and retaining  customers are the quality of services  provided and the
pricing  of such  services,  as well as  identifying  qualified  caregivers  for
specific job requirements and providing  qualified employees in a timely manner.
The Company competes for caregivers based on the quantity, diversity and quality
of assignments,  compensation  packages and benefits.  Competition for referrals
and caregivers may increase in the future and, as a result,  the Company may not
be able to remain  competitive.  To the extent competitors gain or retain market
share by reducing prices or increasing marketing expenditures, the Company could
lose  market  share or  otherwise  experience  a  material  adverse  effect.  In
addition,  the  development of alternative  recruitment  channels could lead the
Company's customers to bypass its services, which would also cause the Company's
revenues and margins to decline.

The Company's  business depends upon its ability to secure new business from its
customers  because the Company does not have  long-term  agreements or exclusive
contracts with them

         The Company does not have long-term  agreements or exclusive guaranteed
order  contracts  with its customers.  The success of the Company's  business is
dependent upon its ability to continually secure new business from its customers
and to service such new business with its  caregivers.  The Company's  customers
are free to seek  services  from the  Company's  competitors  and  choose to use
caregivers  that such  competitors  offer  them.  Therefore,  the  Company  must
maintain positive relationships with its customers, otherwise the Company may be
unable to generate new business for its caregivers,  which could have a material
adverse effect on the Company.



                                      -8-
<PAGE>

Healthcare reform could negatively impact the Company's business  opportunities,
revenues and margins

         The  U.S.   government  has  undertaken   efforts  to  control  growing
healthcare costs through  legislation,  regulation and voluntary agreements with
medical care providers and drug companies. In the recent past, the U.S. Congress
has considered several comprehensive  healthcare reform proposals. The proposals
were  generally  intended to expand  healthcare  coverage for the  uninsured and
reduce the growth of total healthcare expenditures.  While the U.S. Congress did
not adopt any  comprehensive  reform  proposals,  members of Congress  may raise
similar  proposals in the future.  If any of these  proposals are approved,  the
Company's  current  customers  may react by  spending  less on home  health care
services.  If this  were  to  occur,  the  Company  would  have  fewer  business
opportunities, which could have a material adverse effect on its business.

         Furthermore,  third parties, such as health maintenance  organizations,
increasingly  challenge  the prices  charged  for medical  care.  Failure by the
Company's  current  customers  to obtain  full  reimbursement  from those  third
parties could reduce the demand or the price paid for the Company's services.

If  the  Company  is  found  to  be  in   violation  of  Medicare  and  Medicaid
reimbursement  regulations,  it could become subject to retroactive  adjustments
and recoupments

         The  Company,  as a  Medicare  and  Medicaid  provider,  is  subject to
retroactive  adjustments due to prior year audits,  reviews and  investigations,
government  fraud  and abuse  initiatives  and other  similar  actions.  Federal
regulations  also provide for  withholding  payments to recoup  amounts  payable
under the programs. While the Company believes it is in material compliance with
applicable  Medicare and  Medicaid  reimbursement  regulations,  there can be no
assurance that the Company, pursuant to such audits, reviews and investigations,
among other things,  will be found to be in compliance in all respects with such
reimbursement  regulations.  A determination that the Company is in violation of
any such reimbursement  regulations could result in retroactive  adjustments and
recoupments  and have a material  adverse  effect on the Company.  As a Medicaid
provider, the Company also is subject to routine,  unscheduled audits, which may
have an adverse impact on the Company's results of operations.

The Company  operates  in a regulated  industry  and changes in  regulations  or
violations of regulations  may result in increased costs or sanctions that could
reduce its revenues and profitability

         The Company is subject to substantial and frequently  changing federal,
state and local  regulation.  The Company must also comply with state  licensing
along with  federal  and state  eligibility  standards  for  certification  as a
Medicare  and  Medicaid  provider.  In addition,  new laws and  regulations  are
adopted  periodically  to regulate new and existing  services in the health care
industry. Changes in laws or regulations or new interpretations of existing laws
or  regulations  can have a  dramatic  effect on  operating  methods,  costs and
reimbursement  amounts  provided by  government  and other  third-party  payors.
Federal laws governing the Company's  activities  include regulation of Medicare
reimbursement and certification and certain financial



                                      -9-
<PAGE>

relationships  with health care  providers  (collectively,  the "fraud and abuse
laws").  Although the Company intends to comply with all applicable  federal and
state fraud and abuse laws,  these laws are not always  clear and may be subject
to a range of potential  interpretations.  (For further discussion on such fraud
and abuse laws,  see " - Medicare  Fraud and Abuse").  There can be no assurance
that administrative or judicial clarification or interpretation of existing laws
or regulations,  or legislative  enactment of new laws or regulations,  will not
have a material adverse effect on the Company. In addition,  the Balanced Budget
Act of  1997,  as  amended  (the  "Balanced  Budget  Act"),  introduced  several
government initiatives causing changes to Medicare reimbursement,  which changes
have resulted in the Company experiencing a decline in revenue from its Medicare
certified  nursing agency.  (For further  discussion on the Balanced Budget Act,
see " -  Medicare").  There can be no  assurance  that  federal,  state or local
governments will not change existing  standards or impose additional  standards.
Any failure to comply with  existing or future  standards  could have a material
adverse effect on the Company.

Significant legal actions could subject the Company to substantial liabilities

         Provision  of home health  care  services  entails an inherent  risk of
liability.  Certain participants in the home health care industry may be subject
to lawsuits which may involve large claims and significant  defense costs. It is
expected that the Company periodically will be subject to such suits as a result
of the nature of its  business.  The Company  currently  maintains  professional
liability  insurance  intended to cover such claims in amounts which  management
believes are in accordance  with industry  standards.  There can be no assurance
that the  Company  will be able to obtain  liability  insurance  coverage in the
future on acceptable  terms, if at all. There can be no assurance that claims in
excess  of the  Company's  insurance  coverage  or  claims  not  covered  by the
Company's  insurance  coverage  will not arise.  A successful  claim against the
Company  in excess of the  Company's  insurance  coverage  could have a material
adverse effect on the Company.  Claims against the Company,  regardless of their
merit or  eventual  outcome,  may also  have a  material  adverse  effect on the
Company's ability to attract  customers or to expand its business.  In addition,
one of the Company's  subsidiaries is self-insured for its workers  compensation
and is at risk for claims up to certain levels.

The Company is dependent on reimbursement by third-party payors

         For the  twelve  months  ended  July  31,  2003,  2002  and  2001,  the
percentage of the Company's revenues derived from Medicare and Medicaid was 47%,
50% and 51%,  respectively.  The revenues and  profitability  of the Company are
affected  by the  continuing  efforts  of all  third-party  payors to contain or
reduce the costs of health care by lowering  reimbursement rates,  narrowing the
scope of covered  services,  increasing case  management  review of services and
negotiating reduced contract pricing.  Any changes in reimbursement levels under
Medicare,  Medicaid  or  other  payor  sources  and any  changes  in  applicable
government  regulations could have a material adverse effect on the Company. See
Item 7 - "Certain  Trends  Expected  to Impact  Future  Results of  Operations".
Changes in the mix of the Company's patients among Medicare,  Medicaid and other
payor sources may also affect the Company's revenues and profitability.



                                      -10-
<PAGE>

There is no  assurance  that the Company will be able to comply with new federal
health care initiatives, particularly concerning Medicare and Medicaid

         The health care industry  continues to undergo  dramatic  changes.  New
federal health care initiatives,  particularly concerning Medicare and Medicaid,
may be launched.  There can be no assurance  that sweeping  federal  health care
legislation will not be adopted in the future. It is also possible that proposed
federal  legislation will include  language that provides  incentives to further
encourage  Medicare  recipients  to  shift  to  Medicare  at-risk  managed  care
programs.  Some states are adopting  health care programs and  initiatives  as a
replacement  for Medicaid.  There can be no assurance  that the adoption of such
legislation  or   interpretation   of  governmental   health  care  programs  or
initiatives will not have a material adverse effect on the Company.

There can be no  assurance  (i) that the  Company  will be able to  successfully
complete the integration of its recent acquisitions and market penetrations,  or
(ii) that the Company would be successful in claims, if any, for indemnification
from sellers in such transactions

         In recent years,  the Company's  strategic focus was on the acquisition
of small to medium  sized  home  health  care  agencies,  or of certain of their
assets, in targeted markets.  These acquisitions  involve  significant risks and
uncertainties,  including difficulties  integrating acquired personnel and other
corporate  cultures  into the  Company's  business,  the  potential  loss of key
employees or customers of acquired companies,  the assumption of liabilities and
exposure to unforeseen  liabilities  of acquired  companies and the diversion of
management  attention from existing  operations.  The Company may not be able to
fully  integrate the  operations of the acquired  businesses  with its own in an
efficient and cost-effective manner. The failure to effectively integrate any of
these  businesses  could  have a  material  adverse  effect on the  Company.  In
addition,  the Company's growth over the last several years principally has been
the result of acquisitions and penetration of markets  abandoned by competitors.
There can be no  assurance  that the Company  will be able to identify  suitable
acquisitions  or  available  market  share  in the  future  nor  that  any  such
opportunities,  if identified,  will be  consummated  on terms  favorable to the
Company, if at all. In the absence of such successful transactions, there can be
no assurance  that the Company will  experience  further  growth,  nor that such
transactions, if consummated, will result in further growth.

         In addition,  although the Company  attempted  in its  acquisitions  to
determine  the  nature  and  extent  of any  pre-existing  liabilities,  and has
obtained  indemnification  rights from the previous owners for acts or omissions
arising  prior to the date of the  acquisition,  resolving  issues of  liability
between the parties  could involve a  significant  amount of time,  manpower and
expense on the part of the  Company.  If the Company or any of its  subsidiaries
were to be  unsuccessful  in a claim for indemnity from a seller,  the liability
imposed on the Company or its subsidiary could have a material adverse effect on
the Company.

Difficulties   in  maintaining   the  Company's   management   information   and
communications  systems  may  result in  increased  costs  that may  reduce  the
Company's profitability

         The  Company's  ability to deliver its home health care services to its
customers  and manage its  internal  systems  depends to a large extent upon the
performance of the Company's



                                      -11-
<PAGE>

management  information  and  communications  systems.  If these  systems do not
adequately  support the Company's  operations,  or if the Company is required to
incur  significant  additional  costs to maintain or expand these  systems,  its
business and financial results could be materially adversely affected.

The loss of key senior management personnel could adversely affect the Company's
ability to remain competitive

         The Company believes that the success of its business  strategy and its
ability to operate profitably depends on the continued  employment of its senior
management  team. If any member of the Company's  senior  management team became
unable or unwilling to continue in his present positions, the Company's business
and financial results could be materially adversely affected.

Difficulties and risks resulting from continuing growth

         The Company has grown  significantly  over the last three  years.  This
growth,  which has resulted  primarily from  acquisitions  and which  management
intends to continue to pursue,  poses a number of difficulties and risks for the
Company.  As the Company  has grown and may  continue to grow (as to which there
can be no  assurance)  in both  revenue  and  geographical  scope,  such  growth
stretches  the  various   resources  of  the  Company,   including   management,
information systems, regulatory compliance,  logistics and other controls. There
can be no assurance that such resources will keep pace with such growth.  If the
Company does not maintain  such pace,  then its  prospects  would be  materially
adversely affected.

COMPETITION

         The home health care field is highly competitive in each state in which
the Company  operates.  The Company is competing with numerous other licensed as
well as certified home health care agencies in each of the markets it serves. In
addition,  the Company  competes with  companies  that, in addition to providing
home health aide and skilled nursing services, also, unlike the Company, provide
pharmaceutical  products  and other home  health  care  services  that  generate
additional referrals.  The Company believes it is one of the largest competitors
in the  state of  Connecticut.  However,  the  Company  believes  that  numerous
competitors in the other  principal  markets  served by the Company  (i.e.,  the
states of  Massachusetts,  New York and New Jersey) have  substantially  greater
personnel,  financial and other  resources  than the Company.  Competition  also
involves the quality of services provided and the pricing for such services.  As
a result of changes in Medicare  reimbursement and the competitive  pressures of
managed   care,   the  home  health  care   industry   continues  to  experience
consolidation.  In addition, the Company believes that smaller, less financially
secure home health  agencies  will  continue to find it difficult to compete for
market share and comply with regulatory compliance standards.

         The Company's ability to attract a staff of highly trained personnel is
a material element of its business.  There currently is intense  competition for
qualified  personnel  and there can be no  assurance  that the  Company  will be
successful in maintaining or in securing  additional  qualified  personnel.  The
Company's  competition for personnel comes from other industries as well. If and
to



                                      -12-
<PAGE>

the extent that reimbursement  rates and other factors constrain wages and other
benefits to caregivers,  other industries offering more attractive  compensation
and other  benefits also may attract  eligible home health care  personnel.  The
Company recruits  personnel  principally  through newspaper  advertisements  and
through referrals from existing personnel.

CUSTOMERS

         The Company provides its services to four types of payor sources. These
sources include federal and state funded public  assistance  programs  (Medicare
and Medicaid), other third party payors (subcontracts),  insurance companies and
private payors.

         A  substantial  portion  of  the  Company's  revenue  is  derived  from
subcontracts  that the  Company  has with  Medicare  certified  home health care
agencies and long-term  health care provider  programs  that  subcontract  their
patients  to the  Company.  From  time to  time,  some of  these  agencies  have
requested  bids from the home care  agencies to which they  subcontract.  If the
Company is not  successful in  maintaining  these  contracts as they came up for
bid,  it could have a  materially  adverse  effect on the  Company's  results of
operations.

         For the fiscal years ended July 31, 2003,  2002 and 2001,  the State of
New York  Department  of Social  Services  personal  care aide  program  for the
counties  of  Nassau,  Suffolk  and  Westchester  accounted  for 5%, 7% and 10%,
respectively, of the Company's net patient revenue; and the State of Connecticut
Department of Social Services Medical Care Administration  program accounted for
29%, 32% and 32%,  respectively,  of the Company's net patient revenue. The loss
of or a  significant  adverse  change in the  business  terms with either of the
foregoing customers would have a material adverse effect on the Company.

GOVERNMENT REGULATIONS AND LICENSING

         The health care industry is highly regulated. The Company's business is
subject to substantial and frequently changing regulations by federal, state and
local  authorities.  The Company  must comply  with state  licensing  along with
federal and state  eligibility  standards  for  certification  as a Medicare and
Medicaid provider.  The ability of the Company to operate profitably will depend
in part upon the Company  obtaining and maintaining  all necessary  licenses and
other approvals in compliance with applicable health care regulations.

         The Health  Insurance  Portability and  Accountability  Act. The Health
Insurance  Portability  and  Accountability  Act  ("HIPAA")  was  enacted by the
Federal  government on August 12, 1996, and requires  organizations to adhere to
certain standards to protect data integrity,  confidentiality  and availability.
HIPAA  mandates,  among other  things,  that the  Department of Health and Human
Services  (the "DHHS") adopt  standards  for the exchange of  electronic  health
information in an effort to encourage overall administrative  simplification and
enhance the effectiveness  and efficiency of the health care industry.  The DHHS
has also  issued  rules with  respect to certain  health care  transactions  and
relating  to the privacy of health  information,  and  requiring  the Company to
impose  those rules on any  business  associate  to whom we  disclose  protected
information.



                                      -13-
<PAGE>

         Although  HIPAA  was  intended  ultimately  to  reduce   administrative
expenses and burdens faced within the health care industry, the Company believes
that the law has initially brought about significant and, in some cases,  costly
changes.  Sanctions for failing to comply with the HIPAA  provisions  related to
health information practices include criminal and civil penalties. At this time,
management  believes  that  the  Company  is  compliant  with  the  requirements
established to date pursuant to HIPAA. However,  management has not at this time
fully  estimated  the  cost of  compliance,  nor  can it  estimate  the  cost of
compliance  with  future  standards  that may yet be by DHHS  pursuant to HIPAA.
Although the new and proposed health information  standards are likely to have a
significant  effect on the manner in which the Company  handles  health data and
communicates with payors, based on current knowledge,  the Company believes that
the cost of our  compliance  will  not have a  material  adverse  effect  on its
business, financial condition or results of operations.

         Medicare.  Title XVIII of the Social  Security Act authorizes Part A of
the Medicare  program,  the health  insurance  program that pays for home health
care  services  for  covered  persons  (typically,  those  aged 65 and older and
long-term disabled).  Home health care providers may participate in the Medicare
program subject to certain  conditions of participation and upon acceptance of a
provider  agreement  by  the  Secretary  of  Health  and  Human  Services.  Only
enumerated  services,  upon  satisfaction  of  certain  coverage  criteria,  are
eligible  for  reimbursement  as a Medicare  provider.  The Company is currently
Medicare certified in Connecticut and Massachusetts. Approximately 5%, 3% and 2%
of  revenue  for  the  fiscal  years  ended  July  31,  2003,   2002  and  2001,
respectively, were derived from the Medicare program.

         Medicare Fraud and Abuse.  Provisions of the Social  Security Act under
Medicare and Medicaid  generally  prohibit  soliciting,  receiving,  offering or
paying,  directly  or  indirectly,  any form of  remuneration  in return for the
referral of  Medicare or state  health  care  program  patients or patient  care
opportunities,  or in return for the  purchase,  lease or order of any  facility
item or service  that is covered by Medicare or state health care  program.  The
federal government has published  regulations that provide exceptions,  or "safe
harbors",  for  business  transactions  that will be deemed not to  violate  the
anti-kickback  statute.  Violations  of the  statute  may  result  in civil  and
criminal penalties and exclusion from participation in the Medicare and Medicaid
programs.  The Company believes that its current operations are not in violation
of the anti-kickback statute.

         Medicaid.  Approximately  42%,  47% and 48% of  revenue  for the fiscal
years ended July 31, 2003, 2002 and 2001, respectively,  were derived from state
sponsored  Medicaid  programs.  Reimbursement  for  home  health  care  services
rendered to eligible  Medicaid  recipients  is made in an amount  determined  in
accordance with procedures and standards  established by state law under federal
guidelines. States differ as to reimbursement policies and rates. The Company is
a licensed  Medicaid provider in Connecticut,  New Jersey,  Massachusetts and in
Nassau,   Suffolk  and   Westchester   Counties,   New  York.   Future  Medicaid
reimbursement  rates may be reduced in response to state  economic and budgetary
constraints, as well as in response to changes in the Medicare program.

         Proposed New Jersey Legislation.  Legislation  proposed in the state of
New Jersey would establish four regional councils that would maintain registries
of home  health  care  workers and



                                      -14-
<PAGE>

would regulate  various  aspects of the home health care  industry.  Among other
provisions, the legislation would:

         o     Require  all home  health  care  aides  (such as the  individuals
               employed by the Company in rendering  home health care  services)
               to register with the regional councils.

         o     Require private employers such as the Company, to pay the initial
               enrollment fee for their home health care aides.

         o     Require  the  regional  councils  to  provide  consumers  with  a
               referral service of home health care aides.

         o     Permit the regional  councils to employ  health aides  (including
               relatives of the consumers) to provide home health care services.

         o     Permit  the  regional   councils,   in  order  to  support  their
               operations,  to assess and collect  fees from private home health
               care agencies such as the Company.

         o     Establish a minimum  wage of $10.00 per hour for home health care
               aides,  including  home health care aides  employed  the Company.
               This wage level is higher than  average  wage paid by the Company
               in New Jersey.

         o     Prohibit  private  employers  such as the Company from  incurring
               administrative  costs  higher than 25% of the annual  Medicaid or
               state-funded revenue received for home health care aide services.

         The Company believes that this proposed legislation,  if enacted in its
present  form,  would  result  in the  loss of 100%  of the  Company's  Medicaid
business  in New Jersey,  which  represents  approximately  77% of the total net
patient revenue derived by the Company from its New Jersey  operations,  and may
result in the  Company  terminating  its  operations  in that state  altogether.
During  fiscal  2003,  the  Company  derived  approximately  7% of its total net
patient  revenue from operations in New Jersey that would be subject to possible
termination  if this  proposed  legislation  becomes  law.  As of this  date the
proposed legislation is being considered by the applicable committees of the New
Jersey legislature.

ITEM 2.    PROPERTIES.

         The Company,  directly or through certain subsidiaries,  leases various
office  facilities under lease agreements with various  expiration dates through
fiscal 2006. The following sets forth the location,  approximate  square footage
and use of each office, and the expiration date of each lease:


                                      -15-
<PAGE>
<TABLE>
<CAPTION>
                                    Approximate                                               Expiration Date
Location                            Square Feet                    Use                              of Lease
--------                            -----------                    ---                              --------

<S>                                    <C>          <C>                                  <C>
Scarsdale, NY                          2,679        Corporate headquarters               October 31, 2008
Queens, NY                            12,300        Administrative office                July  31, 2005
Lindenhurst, NY                        1,250        Branch office                        July 31, 2004
Mount Vernon, NY                       2,500        Branch office                        November 30, 2003
Hempstead, NY                          3,800        Satellite office                     September 30, 2004
Brooklyn, NY                             800        Satellite office                     October 31, 2003
Bronx, NY                                648        Satellite office                     August 31, 2004
Milford, CT                           15,036        Administrative office                March 31, 2006
Cromwell, CT                          14,419        Administrative office                September 30, 2005
Norwalk, CT                            1,400        Satellite office                     March  31, 2004
Hamden, CT                             1,875        Satellite office                     July 31, 2004
Waterbury, CT                          2,700        Administrative  office               Month to Month
Danbury, CT                              780        Satellite office                     Month to Month
Norwich,  CT                           1,200        Satellite office                     Month to Month
Hartford, CT                             989        Satellite office                     August 31, 2003
Waterbury,  CT                         1,200        Satellite office                     October 31, 2003
West Hartford, CT                      4,455        Administrative  office               October 31, 2005
Guilford, CT                             200        Satellite office                     December 31, 2003
Hackensack, NJ                         4,281        Administrative office                September 30, 2005
Hackensack, NJ                           852        Satellite office                     September 30, 2005
Verona, NJ                             1,765        Branch office                        December 14, 2005
Newton, MA                             2,496        Administrative office                April 30, 2005
Bellingham, MA                           260        Satellite office                     Month to Month
North Andover, MA                        220        Satellite office                     July 31, 2004
Framingham, MA                           525        Satellite office                     Month to Month
Boston, MA                               795        Satellite office                     January 31, 2004
Lynn, MA                                 412        Satellite office                     Month to Month
North Dartmouth, MA                      964        Satellite office                     Month to Month
Chicopee, MA                           1,340        Satellite office                     November 30, 2003
North Easton, MA                         550        Satellite office                     August 31, 2004
Leominster, MA                         1,000        Satellite office                     Month to Month
Worcester, MA                          1,365        Satellite office                     August 31, 2003

</TABLE>

         The Company  believes that its office  facilities  are adequate for the
conduct  of  its  existing  operations.  The  Company  regularly  evaluates  the
suitability  and the  overall  adequacy  of its  various  offices.  The  Company
believes  that it will be able to either (i) renew any leases  that will  expire
during  the  current  fiscal  year or (ii) find  adequate  leases in lieu of any
leases that have expired or will expire during the current fiscal year.




                                      -16-
<PAGE>



ITEM 3.    LEGAL PROCEEDINGS.

         The Company, certain of its officers and directors (who previously were
outside directors of SunStar) (the "director defendants") and other parties were
named as defendants in In Re SunStar  Healthcare  Securities  Litigation (United
States  District Court for Middle  District of Florida),  a  consolidated  class
action  brought on behalf of a purported  class of  shareholders  of SunStar who
purchased  stock of SunStar  between June 15, 1998 and  December  14,  1999.  In
February  2001,  the Court  dismissed  the  Consolidated  Amended  Complaint and
granted plaintiffs leave to amend. The plaintiffs' Second  Consolidated  Amended
Complaint (the "Complaint") purported to assert claims under sections 10(b) (and
Rule 10b-5 promulgated  thereunder) and 20(a) of the Securities  Exchange Act of
1934, as amended,  based upon alleged acts or omissions of the  defendants  that
allegedly resulted in  misrepresentations  or omissions of material  information
concerning the financial condition of SunStar (and its subsidiary SunStar Health
Plan,  Inc., a Florida HMO presently in  receivership  ("Plan")).  The Complaint
also alleged that the Company (which  allegedly  held 30.5% of SunStar's  common
stock during  SunStar's fiscal year ended July 31, 1998 and reduced its holdings
to approximately 25% in 1999) and the director defendants exercised control over
SunStar and therefore are liable as "controlling persons" of SunStar. In October
2001,  the Court granted the  defendants'  motion to dismiss the Complaint  with
prejudice. Plaintiff's did not appeal from this decision against them.

         In a related  action,  the  director  defendants,  along with  thirteen
others,  are named as  defendants  in  Department  of  Insurance of the State of
Florida v. Warren D. Stowell et al. (Circuit Court,  Seminole  County,  Florida)
(the  "Seminole  County  Action") in which the plaintiff as the receiver of Plan
brings claims  purporting to arise out of some of the facts forming the basis of
the class action  described in the  paragraph  above and other  alleged  matters
relating  to the  insolvency  of Plan.  An  amended  complaint  relating  to the
Seminole  County Action was filed on November 17, 2000, and on February 12, 2001
the director  defendants filed motions to dismiss the Seminole County Action. On
May 7, 2001,  the Court granted the director  defendants'  motion to dismiss and
granted the plaintiff  leave to serve a further amended  complaint.  On July 24,
2001,  the  plaintiff  served an amended  complaint.  On September  24, 2001 the
director  defendants  filed a  motion  to  dismiss  the  amended  complaint.  In
September 2002, the director  defendants (and certain other defendants)  entered
into a settlement  agreement with the plaintiff in the Seminole County Action to
resolve  that  action.  The  settlement  agreement,  which is  subject  to court
approval,  was  approved by the trial court in October  2002.  A third party has
appealed  from  the  order of the  trial  court  which  approved  the  foregoing
settlement agreement.

         The Company intends to indemnify the director defendants to the fullest
extent  permitted  under its by-laws and applicable  law in connection  with the
actions  described  herein,  subject to independent  Board  members'  review and
action with respect to the final  details of the proposed  settlement  and final
eligibility and entitlement for such indemnification.

         In  October  2003,  the  Company's  Connecticut  Home  Care  subsidiary
received  a  subpoena  from the United  States  Attorney's  Office in New Haven,
Connecticut.  The subpoena seeks  production of documents in connection  with an
investigation into possible  violations of certain federal health care laws. The
records sought by the subpoena relate to the subsidiary's psychiatric nurses.


                                      -17-
<PAGE>

         The Company has not been advised been advised of the nature or scope of
the investigation.  However,  the Company believes that the investigation  seeks
evidence  of  potentially  fraudulent  claims  that may have been  submitted  by
psychiatric nurses employed by the Connecticut Home Care subsidiary. The Company
cannot  now  predict  the  course or  outcome  of the  investigation  or whether
additional   information   will  be  sought.   The  Company  believes  that  the
investigation extends to certain other competitors in the Connecticut market for
psychiatric  nursing.  The Connecticut Home Care subsidiary intends to cooperate
with the investigation.

                                      -18-
<PAGE>


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.

         No matters  were  submitted  to a vote of  stockholders  of the Company
during the fourth quarter of the fiscal year ended July 31, 2003.



                                      -19-
<PAGE>




                                     PART II


ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK
         AND RELATED STOCKHOLDER MATTERS.

         (a)      Market Information

         The  Company's  Common  Stock is quoted on the NASDAQ  National  Market
under the symbol NHHC.  The following  table presents the quarterly high and low
bid  quotations  in the  over-the-counter  market,  as reported by the  National
Association  of Securities  Dealers for the two fiscal years ended July 31, 2002
and 2003.  These  quotations  reflect the  inter-dealer  prices,  without retail
mark-up,  mark-down  or  commission  and may not  necessarily  represent  actual
transactions.

<TABLE>
<CAPTION>
                                                                                          Market Prices
                                                                              --------------------------------------
                                                                                    High                Low
                                                                                    ----                ---
Year ended July 31, 2002
------------------------

<C>                                                                                <C>                 <C>
1st Quarter..............................................................          $19.85              $8.90
2nd Quarter..............................................................           17.72              10.74
3rd Quarter..............................................................           15.00              10.27
4th Quarter..............................................................           16.65               9.34



Year ended July 31, 2003
------------------------

1st Quarter..............................................................          $10.93              $8.25
2nd Quarter..............................................................           10.90               7.82
3rd Quarter..............................................................           10.34               6.35
4th Quarter..............................................................           7.83                6.50

</TABLE>
         (b)      Holders

         There were  approximately 101 holders of record of the Company's Common
Stock as of October 29, 2003,  excluding shares held by depository companies for
certain beneficial owners.

         (c)      Dividends

         The Company has not  declared or paid any cash  dividends on its Common
Stock  during  the  last  three  fiscal  years.  It  anticipates  that  for  the
foreseeable  future all earnings  will be retained for use in its business  and,
accordingly,  it does not intend to pay cash  dividends.  On March 13, 2001, the
Board of Directors of the Company  declared a 5% stock dividend payable on March
23, 2001 to  stockholders  of record on March 16, 2001.  On April 25, 2002,  the
Board of Directors of the Company  declared a 5% stock  dividend  payable on May
17, 2002 to stockholders of record on May 10, 2002.



                                      -20-
<PAGE>


ITEM 6.  SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
                                                                  Fiscal Years Ended July 31,
                                      ------------------------------------------------------------------------------------
                                            2003              2002             2001           2000               1999
                                      ------------------------------------------------------------------------------------
   STATEMENT OF OPERATIONS DATA:
<S>                                       <C>              <C>               <C>            <C>             <C>
   Revenue...........................     $97,235,000      $82,172,000       $74,492,000    $55,574,000     $38,518,000
   Operating expenses................      87,694,000       73,792,000        67,804,000     51,247,000      36,090,000
   Income from operations............       9,541,000        8,380,000         6,688,000      4,327,000       2,428,000
   Other income (loss):
    Interest income.............              143,000          227,000           216,000        220,000         385,000
     Gain from sale of
      stock of equity investee...                 ---              ---               ---      1,602,000             ---
    (Loss) from equity investee......             ---              ---               ---            ---         (674,000)
   Income before income taxes........       9,684,000        8,607,000         6,904,000      6,149,000       2,139,000
   Provision for income taxes........       3,901,000        3,336,000         2,704,000      2,058,000       1,001,000
   Net income........................       5,783,000        5,271,000         4,200,000      4,091,000       1,138,000
   Primary net income per share of
   common stock......................           $1.04            $0.96             $0.77          $0.74           $0.20
   Diluted net income per share of
   common stock......................           $1.01            $0.91             $0.75          $0.74           $0.20



                                                                       At July 31,
                                -------------------------------------------------------------------------------------------
                                       2003                2002              2001             2000               1999
                                -------------------------------------------------------------------------------------------
BALANCE SHEET DATA:

Total assets....................       $48,473,000        $43,512,000      $37,250,000       $30,856,000       $26,092,000
Working capital.................        29,551,000         28,232,000       22,138,000        19,312,000        17,708,000
Retained earnings...............        21,622,000         15,839,000       14,784,000        12,274,000         8,183,000
Stockholders' equity............        43,866,000         38,679,000       32,584,000        28,486,000        25,013,000

</TABLE>



                                      -21-
<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS.

GENERAL

         The following  discussion and analysis  provides  information which the
Company's  management believes is relevant to an assessment and understanding of
the Company's  results of operations and financial  condition.  This  discussion
should be read in conjunction  with the  consolidated  financial  statements and
notes appearing elsewhere herein.

         The Company is subject to  external  factors  that could  significantly
impact its business,  including  potential  reductions in reimbursement rates by
Medicare,  Medicaid  and other third party  payors for the  Company's  services,
retroactive  adjustments due to prior year audits,  reviews and  investigations,
government  fraud and abuse  initiatives  and other such factors that are beyond
the control of the Company.  These factors could cause future  results to differ
materially from historical results.

THE IMPACT OF THE BALANCED BUDGET ACT

         The  Balanced  Budget Act was signed into law in August  1997.  The Act
made significant  changes in the  reimbursement  system for Medicare home health
care services.  The primary change  affecting the Company was a restructuring of
the  reimbursement  system  related  to  Medicare  certified  home  health  care
agencies.  Prior to the Act, Medicare reimbursed  providers on a reasonable cost
basis subject to program-imposed cost per visit limitations.

         Under  the Act,  changes  in  Medicare  home  care  reimbursement  were
scheduled in two phases.  A temporary  or interim  payment  system  ("IPS") took
effect for cost reports  beginning on or after October 1, 1997.  Under IPS, home
health care providers were reimbursed the lowest of (i) their actual costs, (ii)
cost limits based on 105% of median costs of freestanding  home health agencies,
or (iii) an agency-specific per patient cost limit, based on 1994 costs adjusted
for  inflation.  Under IPS, most Medicare  providers  were  reimbursed  under an
agency-specific  per patient cost limit.  Effective  October 1, 2001,  under the
prospective  payment system,  Medicare now reimburses  providers a predetermined
base payment. The payment is adjusted for the health condition and care needs of
the  beneficiary  and is also adjusted for the  geographic  differences in wages
across the country.  Medicare  provides  home health  agencies with payments for
60-day "episodes of care".

         The  final  phase  of  the  Act  implemented  a  15%  cut  in  Medicare
reimbursement  rates effective October 1, 2002. In each of the last three fiscal
years,  less than five percent of the Company's net patient  revenue was derived
directly from Medicare,  and accordingly  the change to the prospective  payment
system has not, to date, had a material adverse impact on the Company.  However,
there can be no assurance that the Medicare  prospective payment system will not
adversely  impact the Company's  reimbursement  rates in the future or otherwise
have a material adverse effect on the Company.  The Company's  operations in New
York and New


                                      -22-
<PAGE>

Jersey are dependent  upon  referrals,  primarily  from Medicare  certified home
health care agencies,  whose  reimbursement  has been adversely  affected by the
prospective payment system.  Under the prospective payment system,  there can be
no assurance  that the  Company's  future  referrals  will not result in reduced
reimbursement rates or reduced volume of business.

RECENT ACQUISITIONS

         The following  acquisitions were made either directly by the Company or
through one of the Company's  wholly owned  subsidiaries.  With the exception of
the Medical Resources and Accredited acquisitions described below, each of these
acquisitions  complemented an existing business of the Company in the respective
geographical  area. Each of the  acquisitions  described below was accounted for
utilizing  purchase  accounting   principles.   At  the  time  of  each  of  the
acquisitions  described below, the revenues of each respective acquired business
constituted less than ten percent of the consolidated revenues of the Company.

         On March 17, 2003,  the Company  acquired  through New England  certain
assets from Professional  Relief Nurses,  Inc. ("PRN"),  a licensed and Medicare
certified  home health care company in the state of  Connecticut  that  provides
nursing and home health aide  services in  Hartford,  Litchfield,  New Haven and
Middlesex Counties, Connecticut.

         On December 14, 2002, the Company acquired through  Accredited  certain
assets from Mary Baker's Health Care Services,  Inc. ("Mary Baker"),  a licensed
home health care  company in the state of New Jersey that  provides  home health
aide services in Bergen and Passaic Counties, New Jersey.

         On September 3, 2002, the Company,  through a  newly-formed  subsidiary
Medical Resources  acquired certain assets of Medical Resources Inc. and related
entities  ("Medical  Resources").  Medical  Resources  provides home health aide
services throughout Massachusetts.

         On August 25, 2000, the Company  acquired  through  Accredited  certain
assets of Health Force. Health Force's operations included the provision of home
health aide and skilled nursing services in northern and central New Jersey.

         On April 14, 2000,  the Company  acquired  through New England  certain
assets of the Connecticut  operations of U.S.  HomeCare-Connecticut,  a licensed
and Medicare certified home health care company in the state of Connecticut.

         On  November  1, 1999,  the  Company  acquired,  through  wholly  owned
subsidiaries in Connecticut,  certain assets of the Optimum Entities. The assets
were acquired from a court-appointed Chapter 7 Trustee. The final purchase price
was  determined  through  an auction  process  conducted  at the  United  States
Bankruptcy Court for the District of Massachusetts. The Company is operating the
acquired assets under New England and a recently formed subsidiary,  Connecticut
Staffing.  The Optimum  Entities  had been  engaged in the business of providing
home health care and staffing related services in Connecticut.



                                      -23-
<PAGE>

         On October 30, 1998, the Company  acquired all the  outstanding  common
shares of  Accredited.  Accredited  is a licensed  home health care company that
provides home health care services in Bergen,  Hudson,  Passaic,  Essex, Morris,
Union, Somerset and Middlesex Counties, New Jersey.

CRITICAL ACCOUNTING POLICIES

         The Company believes that the most critical accounting policies used in
the  preparation  of its  consolidated  financial  statements are those policies
relating to recognizing net patient  revenue,  determining the value of accounts
receivable, and assessing the value of goodwill and other long-lived assets.

         Net  Patient  Revenue.  The  Company  recognizes  net  patient  revenue
generally on the date services are provided to patients.  Net patient revenue is
recorded  at  amounts  the  Company  expects  to  receive  under   reimbursement
arrangements  with  third-party  payors,  including  private  insurers,  private
payors,  subcontractors,  Medicaid and Medicare.  Because the Company's business
depends upon third-party payors whose  reimbursement  rates and payment policies
are complex and subject to possible  change from time to time,  the Company must
make estimates with respect to certain  amounts it records as the net realizable
value of net patent  revenue and accounts  receivable.  Because of the potential
for changes in these third-party  reimbursement rates and payment policies,  and
as a result of the  complexity  of  certain  of these  policies,  the  estimated
amounts originally  recorded as net patient revenue and accounts  receivable may
be subject to revision as additional information becomes known.

         Accounts  Receivable.  Accounts  receivable are reduced by an allowance
for possible  losses that provides a reserve with respect to those  accounts for
which net patient  revenue was recognized  but with respect to which  management
subsequently determines that payment is not expected to be received. The Company
analyzes the balances of accounts receivable to ensure that the recorded amounts
properly  reflect the amounts expected to be collected.  This analysis  involves
the  application  of varying  percentages to each accounts  receivable  category
based on the age of the receivable.  The result of this aging analysis  provides
the initial estimate of the amount of  uncollectible  accounts  receivable.  The
amount  ultimately  recorded as the reserve is determined  after management also
analyzes the  collectibility  of specific  large or  problematic  accounts on an
individual basis, as well as the overall business climate and other factors. The
Company's  estimate of the percentage of uncollectible  accounts may change from
time to time and any such change could have a material  impact on the  Company's
financial condition and results of operations.

         Goodwill  and  Other  Long-Lived  Assets.  Goodwill  arising  from  the
acquisitions  of businesses is recorded as the excess of the purchase price over
the estimated fair value of the net assets of the businesses acquired. Statement
of  Financial  Accounting  Standards  No. 142  ("Goodwill  and Other  Intangible
Assets") provides that goodwill is to be tested for impairment annually, or more
frequently if circumstances indicate potential impairment.  Consistent with this
standard,  the Company reviews goodwill,  as well as other intangible assets and
long-term assets, for impairment  annually or more frequently as warranted,  and
if  circumstances  indicate  that the recorded  value of any such other asset is
impaired,  such asset is written down to its proper value.



                                      -24-
<PAGE>

The Company  currently  does not believe any  impairment  of its goodwill or any
such other asset existed at July 31, 2003.  Nevertheless,  future  conditions or
events  could  adversely  affect the  recorded  value of  goodwill or such other
assets.  If any  item of  goodwill  or such  other  asset  is  determined  to be
impaired,  an impairment  loss would be recognized  equal to the amount by which
the recorded value exceeds the estimated fair market value.

RESULTS OF OPERATIONS
---------------------

<TABLE>
<CAPTION>

(% of net patient revenue)                                   FISCAL YEAR ENDED JULY 31,
                                                             --------------------------
                                                     2003             2002               2001
                                                     ----             ----               ----

<S>                                                   <C>              <C>              <C>
Net patient revenue                                   100.0%           100.0%           100.0%
Cost of revenue                                        65.0             63.6             65.2
General and administrative                             24.2             25.1             23.7
Allowance for possible losses                         ---                 .1               .8
Amortization of intangibles                             1.0              1.0              1.3
                                                 ----------      -----------       ----------
Total operating expenses                               90.2             89.8             91.0
Income from operations                                  9.8             10.2              9.0
Interest income                                          .1               .3              .3
                                                ------------     ------------     -----------
Income before income taxes                              9.9             10.5              9.3
Provision for income taxes                              4.0              4.1              3.7
                                                -----------         --------        ---------
Net income                                              5.9%             6.4%             5.6%
                                                ===========         ========        =========
</TABLE>

CERTAIN TRENDS EXPECTED TO IMPACT FUTURE RESULTS OF OPERATIONS

         Medicaid  reimbursement,   like  other  third-party  reimbursement,  is
subject to rate changes from time to time that may affect the Company. Effective
May 1, 2003, the Connecticut Department of Social Services significantly reduced
the  Medicaid  reimbursement  rate for certain  nursing  visits.  The rate for a
medication   administration   visit,   defined   as   administration   of  oral,
intramuscular and/or subcutaneous medication by health care agency/professional,
was reduced from $85 to $52 per visit. The Company believes that the decrease is
consistent with the continuing  efforts by all third-party  payors to contain or
reduce costs.  The rate change went into effect  beginning with the start of the
Company's  fourth  quarter of fiscal 2003.  Without  giving  effect to any other
changes  in  regulated  reimbursement  rates or  changes in the volume or mix of
services  provided by the Company,  management  estimates  that at the Company's
level of operations on May 1, 2003, this Connecticut rate change will reduce the
Company's future annual revenue and net income by  approximately  $6,000,000 and
$1,560,000, respectively.

         As a Medicaid provider, the Company is subject to routine,  unscheduled
audits.  These audits may result in the  application of a  statistically-derived
adjustment factor to the Company's



                                      -25-
<PAGE>

revenues,  which  may  have  an  adverse  impact  on the  Company's  results  of
operations.  Although  the  audits to date  have not  resulted  in any  material
adjustments,  such  audits  were  conducted  at a  time  when  the  Company  had
significantly  lower  Medicaid  revenues.  There can be no assurance that future
Medicaid audits will not have a material adverse impact on the Company.

YEAR ENDED JULY 31, 2003 COMPARED TO YEAR ENDED JULY 31, 2002

         Net Patient  Revenue.  For the fiscal year ended July 31, 2003 ("fiscal
2003"), net patient revenue increased $15,063,000, or 18.3%, to $97,235,000 from
$82,172,000  for the fiscal year ended July 31, 2002  ("fiscal  2002").  Of this
increase,  $7,739,000 was  attributable to additional  revenue  generated by the
business  acquired in September  2002 from  Medical  Resources;  $5,323,000  was
attributable to additional  revenue  resulting from continued  successful market
penetration  of  existing  markets and the  Company's  other  acquisitions;  and
$2,001,000  was  attributable  to the expansion of the  Company's  operations to
include the staffing of nurses and other  personnel to hospitals,  nursing homes
and other health care facilities in New York and New Jersey.

         Gross Profit. Gross profit margin decreased to 35% for fiscal 2003 from
36.4% for fiscal 2002.  This decrease was primarily  attributable to lower gross
profit margins on the new staffing  operations,  the  Connecticut  reimbursement
rate reduction  effective May 1, 2003, and certain  increases in direct payments
to care givers. During fiscal 2003, the Company did not benefit by any increases
in its  Medicaid  reimbursement  rates  until  July 2003 (the last  month of the
fiscal year), when Medicaid  reimbursement  rates in Connecticut  increased 3.3%
for  comprehensive  skilled  nursing  visits and 7% for home health aide visits;
these July 2003 rate  increases were unrelated to the type of nursing visits for
which  significant  rate reductions  were  implemented in May 2003, as described
previously  in this  management's  discussion  and  analysis  under the  caption
"Certain Trends Expected to Impact Future Results of Operations."

         General  and  Administrative.   General  and  administrative   expenses
increased  $2,880,000,  or 13.9%, to $23,547,000 in fiscal 2003 from $20,667,000
in fiscal 2002. Of this  increase,  $2,071,000  was  attributable  to additional
administrative  personnel and occupancy  costs related to the business  acquired
from  Medical  Resources;  and the balance of $809,000 was  attributable  to the
opening of an additional  full-service  administrative  office in West Hartford,
Connecticut and increases in the Company's  insurance costs over fiscal 2002. As
a  percentage  of net  patient  revenue,  general  and  administrative  expenses
decreased to 24.2% in fiscal 2003 from 25.1% in fiscal 2002.  This  decrease was
primarily  attributable  to the fact that net  patient  revenue  increased  by a
greater percentage than the increase in general administrative expenses.

         Amortization.  Amortization of intangibles  increased $45,000, or 8.2%,
to $591,000 in fiscal 2003 from $546,000 in fiscal 2002. This increase  resulted
from  additional  amortization  attributable  to the business  acquisition  from
Medical Resources,  offset by reduced  amortization of intangibles from previous
acquisitions that have now been fully amortized.

         Allowance for Possible  Losses.  The Company  recorded an allowance for
possible  losses of  $300,000  in fiscal  2003 as compared to $295,000 in fiscal
2002.



                                      -26-
<PAGE>

         Income  from  Operations.  As a result of the  foregoing,  income  from
operations  increased  $1,161,000,  or 13.9%,  to $9,541,000 in fiscal 2003 from
$8,380,000 in fiscal 2002.

         Interest Income. Interest income decreased $84,000, or 37%, to $143,000
in fiscal 2003 from $227,000 in fiscal 2002.  This decrease was  attributable to
the  lower  cash  balances  of the  Company,  as a result  of the  current  year
acquisitions, as well as the continued decline in interest rates.

         Income Taxes.  The Company's  effective tax rate  increased to 40.3% in
fiscal 2003 as compared to 38.8% in fiscal 2002. This increase was  attributable
to higher state income tax rates and a decrease in work  opportunity tax credits
in the current fiscal year.

         Net Income. Net income increased $512,000,  or 9.7%, to $5,783,000,  or
$1.01 per diluted  share,  in fiscal 2003 from  $5,271,000,  or $.91 per diluted
share,  in fiscal 2002.  This  increase and the increase in net patient  revenue
over the fiscal year,  as well as over recent  fiscal  years,  was  attributable
principally to the Company's expansion of its operations through penetrations of
markets vacated by competitors  and the successful  integration of the Company's
acquisitions  over the recent fiscal years. Such increases would not be expected
to  continue  at the  same  rate,  if at all,  in the  absence  of  future  such
acquisitions,  as to which there can be no assurance.  As discussed elsewhere in
this  management  discussion  and  analysis,  the Company will also be adversely
affected by recent decreases in rates of reimbursement.

YEAR ENDED JULY 31, 2002 COMPARED TO YEAR ENDED JULY 31, 2001

         Net Patient  Revenue.  For fiscal 2002, net patient  revenue  increased
$7,680,000,  or 10.3%, to $82,172,000 from $74,492,000 for the fiscal year ended
July 31, 2001 ("fiscal  2001").  This increase was attributable to the expansion
of operations in Connecticut, in which net patient revenue increased $5,235,000,
and in New York,  where net  patient  revenue  increased  $1,472,000,  partially
attributable  to  Impressive  Staffing  Corp.  ("Impressive"),  a  newly  formed
subsidiary  of Health  Acquisition  Corp.  that is engaged in the  staffing  and
related  personnel  to  hospitals,  nursing  homes  and  facilities.  Impressive
commenced  operations in February  2002 and had net patient  revenue of $497,000
for fiscal 2002.  In addition,  net patient  revenue  increased  $973,000 in New
Jersey over fiscal 2001.

         Gross Profit.  Gross profit  margin  increased to 36.4% for fiscal 2002
from  34.8% for  fiscal  2001.  This  increase  was  primarily  attributable  to
increases in Medicaid  reimbursement rates in both Connecticut and New Jersey in
the  month  of  July  2001.   The  Company   experienced  no  such  increase  in
reimbursement rates in New York, New Jersey or Connecticut during fiscal 2002.

         General  and  Administrative.   General  and  administrative   expenses
increased  $3,039,000,  or 17.2%, to $20,667,000 in fiscal 2002 from $17,628,000
in fiscal 2001.  This increase was  attributable  to  additional  administrative
personnel,  an increase in all insurance costs,  professional fees and occupancy
related  costs  incurred in  connection  with the expansion of operations in all
service areas. The Company also incurred  additional  general and administrative
costs in connection  with the startup  during fiscal 2002 of Impressive  and New
Jersey Staffing Works



                                      -27-
<PAGE>

Corp. ("New Jersey  Staffing"),  a newly formed subsidiary of the Company in New
Jersey that is engaged in the  staffing  and  related  personnel  to  hospitals,
nursing homes and other health care  facilities.  New Jersey Staffing  commenced
operations in September  2002. As a percentage of net patient  revenue,  general
and  administrative  expenses  increased  to 25.1% in fiscal  2002 from 23.7% in
fiscal  2001.  The  increase in general  and  administrative  expenses  over the
periods  includes the increase of $992,000 of such expenses over the  respective
fourth  quarters of such  periods,  which  resulted  from certain  non-recurring
expenses during the recent fourth quarter, including as discussed above.

         Amortization. Amortization of intangibles decreased $410,000, or 42.9%,
to $546,000  in fiscal  2002 from  $956,000  in fiscal  2001.  This  decrease is
attributable  to the  Company  adopting  SFAS Nos.  141 and 142 in fiscal  2002,
pursuant to which the Company no longer  amortizes  goodwill,  but instead tests
goodwill for impairment at least annually.

         Allowance for Possible  Losses.  The Company  recorded an allowance for
possible  losses of  $295,000  in fiscal  2002 as compared to $670,000 in fiscal
2001. The Company had reserved  against its accounts  receivable in the previous
year as a result of the  Company  entering  into  contracts  with many new payor
sources over the two prior years.

         Income  from  Operations.  As a result of the  foregoing,  income  from
operations  increased  $1,692,000,  or 25.3%,  to $8,380,000 in fiscal 2002 from
$6,688,000 in fiscal 2001.

         Interest  Income.  Interest  income  increased  slightly to $227,000 in
fiscal 2002 from $216,000 in fiscal 2001. The increase was  attributable  to the
higher cash balances in fiscal 2002, offset by the continued decline in interest
rates.

         Income Taxes.  The Company's  effective tax rate decreased  slightly to
38.8% in fiscal 2002 as  compared to 39.2% in fiscal  2001.  This  decrease  was
attributable to a decline in state corporate income tax rates.

         Net Income. Net income increased  $1,071,000,  or 25.5%, to $5,271,000,
or $.91 per diluted share, in fiscal 2002 from  $4,200,000,  or $.75 per diluted
share,  in fiscal 2001.  This  increase and the increase in net patient  revenue
over  the  fiscal  year,  as  well  as  over  other  recent  fiscal  years,  was
attributable  principally to the Company's  expansion of its operations  through
penetrations of markets vacated by competitors and the successful integration of
the Company's  acquisitions  over the past three years. Such increases would not
be expected  to  continue at the same rate,  if at all, in the absence of future
such acquisitions or market penetrations, as to which there can be no assurance.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

         Current  assets   increased   $1,093,000  to  $34,158,000  and  current
liabilities  decreased  $226,000 to $4,607,000  at July 31, 2003.  These changes
resulted in an increase in working  capital of $1,319,000 to $29,551,000 at July
31, 2003 from $28,232,000 at July 31, 2002. Cash and cash equivalents  decreased
$1,089,000 to  $14,252,000  at July 31, 2003 from  $15,341,000 at



                                      -28-
<PAGE>

July 31, 2002. The decrease in cash was attributable to the use of approximately
$4,706,000 of cash for the  acquisitions of businesses  from Medical  Resources,
Mary Baker and PRN.

         Net cash provided by operating activities was $4,519,000 in fiscal 2003
as compared  with  $6,498,000  in fiscal 2002.  The decrease in cash provided by
operating activities of $1,979,000,  or 30.5%, is attributable to an increase in
operating assets, primarily accounts receivable, of $1,664,000 and a decrease in
operating liabilities of $553,000,  offset by an increase in operating cash flow
of $238,000 over fiscal 2002.

         Investing activities in fiscal 2003 used cash of $5,012,000 as compared
to cash used of $586,000 in fiscal 2002.  The cash used in investing  activities
in fiscal 2003 consisted of the purchase of businesses  and equipment.  The cash
used in  investing  activities  in fiscal  2002  consisted  of the  purchase  of
equipment, the purchase of businesses and other investing activities.

         Financing  activities  in fiscal 2003 used cash of $596,000 as compared
to cash  provided  of  $347,000  in  fiscal  2002.  The cash  used in  financing
activities in fiscal 2003 consisted of the purchase of treasury stock, offset by
the proceeds from the exercise of stock options.  The cash provided by financing
activities  in fiscal 2002  consisted of the proceeds from the exercise of stock
options, offset by the purchase of treasury stock.

         As a result of the May 1, 2003  reduction of certain  Medicaid  nursing
rates in  Connecticut,  the Company  expects an annual decline in operating cash
flow  of  approximately  $1,560,000,  absent  other  changes  in  the  Company's
operations or other changes in reimbursement rates.

         The nature of the Company's business requires weekly payments to health
care personnel at the time services are rendered. The Company typically receives
payment for these  services  in 90 to 120 days with  respect to  contracted  and
insurance business and 8 to 45 days with respect to certain governmental payors,
such as Medicare and Medicaid programs. Accounts receivable turnover was 68 days
in fiscal 2003, down from 75 days in fiscal 2002.

         The  Company has renewed its  $7,500,000  committed  revolving  line of
credit  facility  (the "credit  facility")  with its bank.  The credit  facility
provides  for the  Company  to borrow up to the lesser of  $7,500,000  or 80% of
eligible  accounts  receivable  that are aged less  than 120 days at the  bank's
prime rate or LIBOR plus 2.5%. The credit  facility  expires in October 2005 and
requires the Company to meet certain financial covenants and ratios. The Company
is required to pay .25% commitment fee on unused amounts,  payable  quarterly in
arrears.  At July 31,  2003 there was no  outstanding  balance  under the credit
facility.

         In April  2003,  the  Board  of  Directors  increased  its  program  to
repurchase its Common Stock from $1,000,000 to $3,000,00 for an additional year.
Purchases  would  be made  from  time to time in the  open  market  and  through
privately  negotiated   transactions,   subject  to  general  market  and  other
conditions.  The buyback  program will be financed out of existing  cash or cash
equivalents.



                                      -29-
<PAGE>

         The Company  intends to incur  capital  expenditures  of  approximately
$500,000   during  the  next  fiscal  year  in  connection   with  the  proposed
implementation of new computer  software systems and hardware.  The new hardware
would be designed to, among other things,  update certain data input  capability
regarding services rendered at certain locations.  The Company believes that the
software will provide efficiencies in data organization, retrieval and analysis,
both for  continuing  operations  and in  connection  with certain  audits.  The
Company intends to fund these expenditures and otherwise meet its short term and
long  term  liquidity  needs  with its  current  cash  balances,  cash flow from
operations and its credit facility.

         In the opinion of management,  there will be no material  impact on the
financial  statements  of  the  Company  from  any  recently  issued  accounting
standards.

INFLATION AND SEASONALITY

         The rate of inflation had no material  effect on operations  for fiscal
2003.  The effects of inflation  on personnel  costs in the future could have an
adverse  effect on  operations,  as the Company may not be able to increase  its
charges for services rendered. The Company's business is not seasonal.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

            None.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The  financial  information  required  by this item is set forth in the
Consolidated Financial Statements on pages F-1 through F-32.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURE.

         None.

ITEM 9A.    CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         The Company  maintains  disclosure  controls  and  procedures  that are
designed to ensure that information required to be disclosed in the reports that
the Company is required to file under the Securities and Exchange Act of 1934 is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's  rules and forms,  and that such  information  is  accumulated  and
communicated  to the Company's  management,  including  the principal  executive
officer  and  principal  financial  officer,  as  appropriate,  to allow  timely
decisions regarding required disclosure.  The Company's  management  necessarily
has applied its  judgment in assessing  the costs and benefits of such  controls
and procedures,  which, by their nature,  can provide only reasonable  assurance
regarding  management's  control objectives.  Management



                                      -30-
<PAGE>

believes that there are reasonable  assurances  that our controls and procedures
will achieve management's control objectives.

         The Company has carried out an evaluation,  under the  supervision  and
with the  participation  of its  management,  including  the President and Chief
Executive Officer and the Vice President of Finance and Chief Financial Officer,
of the  effectiveness  of the design and operation of the  Company's  disclosure
controls  and  procedures  pursuant to  Exchange  Act Rule 13a-15 as of July 31,
2003.  Based upon the foregoing,  the President and Chief Executive  Officer and
the Vice  President of Finance and Chief  Financial  Officer  concluded that the
Company's  disclosure  controls and procedures are effective in timely  alerting
them to  material  information  relating to the  Company  (and its  consolidated
subsidiaries) required to be included in its Exchange Act reports.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

         The  evaluation  referred to above did not  identify any changes in the
Company's  internal  controls over financial  reporting that occurred during the
quarter ended July 31, 2003 that have  materially  affected,  or are  reasonably
likely to materially  affect,  the  Company's  internal  control over  financial
reporting.

                                    PART III

         The  information  required  by each of the items of Part III (Items 10,
11,  12,  13 and 14) is  omitted  from  this  Report.  Pursuant  to the  General
Instruction  G(3) to Form 10-K,  the  information  is included in the  Company's
Proxy  Statement for its 2003 Annual  Meeting of  Stockholders  to be held on or
about December 5, 2003,  and is  incorporated  herein by reference.  The Company
intends  to file  such  Proxy  Statement  with the SEC not  later  than 120 days
subsequent to July 31, 2003.

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11.    EXECUTIVE COMPENSATION.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.


                                     PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a) The  following  represents a listing of all  financial  statements,
financial statement schedules and exhibits filed as part of this Report:



                                      -31-
<PAGE>

             Pages    F-1   through   F-32:    Financial   Statements   and
                      Supplemental  Material (see index to the consolidated
                      financial statements).
             Exhibit 3.4: Amendment to Article III, Section 3 of By-Laws.
             Exhibit 10.14: Audit Committee Charter adopted July 17, 2003.
             Exhibit 10.15: Code of Ethics as of October 23, 2003.
             Exhibit 21.1: List of Subsidiaries.
             Exhibit 23.1: Consent of BDO Seidman, LLP.
             Exhibit  31.1:  Certification of Principal  Executive  Officer
                      pursuant  to  18  U.S.C.  Section  1350,  as  adopted
                      pursuant to Section 302 of the  Sarbanes-Oxley Act of
                      2002.
             Exhibit  31.2:  Certification of Principal  Financial  Officer
                      pursuant  to  18  U.S.C.  Section  1350,  as  adopted
                      pursuant to Section 302 of the  Sarbanes-Oxley Act of
                      2002.
             Exhibit  32.1:  Certification of Principal  Executive  Officer
                      pursuant  to  18  U.S.C.  Section  1350,  as  adopted
                      pursuant to Section 906 of the  Sarbanes-Oxley Act of
                      2002.
             Exhibit  32.2:  Certification of Principal  Financial  Officer
                      pursuant  to  18  U.S.C.  Section  1350,  as  adopted
                      pursuant to Section 906 of the  Sarbanes-Oxley Act of
                      2002.







                                      -32-
<PAGE>


                         NATIONAL HOME HEALTH CARE CORP.
                                        AND SUBSIDIARIES















================================================================================
                                               CONSOLIDATED FINANCIAL STATEMENTS
                                                       AND SUPPLEMENTAL MATERIAL
                                        YEARS ENDED JULY 31, 2003, 2002 AND 2001





                                      F-1
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                                    CONTENTS


   REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                     3

   CONSOLIDATED FINANCIAL STATEMENTS:
      Balance sheets                                                      4
      Statements of earnings                                              5
      Statements of changes in stockholders' equity                       6
      Statements of cash flows                                            7
      Summary of accounting policies                                   8-17
      Notes to consolidated financial statements                      18-29

   SUPPLEMENTAL MATERIAL:
      Report of independent Certified Public Accountants on
        supplemental material                                            30
      Schedule II valuation and qualifying accounts                      31






                                      F-2
<PAGE>



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
National Home Health Care Corp.
Scarsdale, New York

We have audited the  accompanying  consolidated  balance sheets of National Home
Health Care Corp. and  Subsidiaries as of July 31, 2003 and 2002 and the related
consolidated  statements of earnings,  changes in stockholders'  equity and cash
flows for the years  ended  July 31,  2003,  2002 and 2001.  These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of National Home Health
Care Corp. and  Subsidiaries at July 31, 2003 and 2002, and the results of their
operations and their cash flows for the years then ended July 31, 2003, 2002 and
2001 in conformity with accounting  principles  generally accepted in the United
States of America.




BDO Seidman, LLP
Valhalla, New York

October 3, 2003




                                      F-3
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                     CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
July 31,                                                                                 2003                  2002
--------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT:
<S>                                                                              <C>                    <C>
   Cash, (including cash equivalents of $10,645,000 and $13,481,000,
      respectively) (Note 8)                                                      $14,252,000           $15,341,000
   Investments                                                                         22,000                35,000
   Accounts receivable, less allowance for possible losses of $622,000
      and $691,000, respectively (Notes 8 and 10)                                  18,705,000            16,382,000
   Prepaid expenses and other                                                         804,000               778,000
   Income taxes receivable                                                                  -               234,000
   Deferred income taxes (Note 7)                                                     375,000               295,000
--------------------------------------------------------------------------------------------------------------------
           TOTAL CURRENT ASSETS                                                    34,158,000            33,065,000
--------------------------------------------------------------------------------------------------------------------
     Furniture, equipment and leasehold improvements, net (Note 1)                  1,030,000               857,000
Goodwill (Note 2)                                                                  10,628,000             7,366,000
Other intangible assets, net (Note 3)                                               2,099,000             1,406,000
Deferred income taxes (Note 7)                                                        163,000               515,000
Deposits and other assets                                                             395,000               303,000
--------------------------------------------------------------------------------------------------------------------
                                                                                  $48,473,000           $43,512,000
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued expenses (Note 4)                                $  3,257,000          $  3,581,000
   Estimated third-party payor settlements                                            756,000               912,000
   Deferred revenue                                                                   460,000               340,000
   Income taxes payable                                                               134,000                     -
--------------------------------------------------------------------------------------------------------------------
           TOTAL CURRENT LIABILITIES                                                4,607,000             4,833,000
--------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDERS' EQUITY (NOTE 9):
   Common stock, $.001 par value, shares authorized - 20,000,000;
      issued shares- 6,903,819 and 6,902,819, respectively                              7,000                 7,000
   Additional paid-in capital                                                      25,556,000            25,552,000
   Retained earnings                                                               21,622,000            15,839,000
--------------------------------------------------------------------------------------------------------------------
                                                                                   47,185,000            41,398,000
   Less treasury stock (1,407,571 and 1,329,979 shares)- at cost (Note
      12)                                                                           3,319,000             2,719,000
--------------------------------------------------------------------------------------------------------------------
           TOTAL STOCKHOLDERS' EQUITY                                              43,866,000            38,679,000
--------------------------------------------------------------------------------------------------------------------
                                                                                  $48,473,000           $43,512,000
====================================================================================================================
</TABLE>

                                 See accompanying summary of accounting policies
                                 and notes to consolidated financial statements.


                                      F-4
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES




                                             CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>

 Years ended July 31,                                                        2003             2002               2001
                                                                             ----             ----               ----
 ----------------------------------------------------------------------------------------------------------------------
<S>                        <C>                                        <C>               <C>                <C>
 NET PATIENT REVENUE (NOTE 8)                                         $97,235,000       $82,172,000        $74,492,000
                                                                      -----------       -----------        -----------
 ----------------------------------------------------------------------------------------------------------------------
 OPERATING EXPENSES:
    Cost of revenue                                                    63,256,000        52,284,000         48,550,000
                                                                       ----------        ----------         ----------
    General and administrative                                         23,547,000        20,667,000         17,628,000
                                                                       ----------        ----------         ----------
    Amortization of intangibles                                           591,000           546,000            956,000
                                                                          -------           -------            -------
    Allowance for possible losses                                         300,000           295,000            670,000
                                                                          -------           -------            -------
 ----------------------------------------------------------------------------------------------------------------------
         TOTAL OPERATING EXPENSES                                      87,694,000        73,792,000         67,804,000
                                                                       ----------        ----------         ----------
 ----------------------------------------------------------------------------------------------------------------------
         INCOME FROM OPERATIONS                                         9,541,000         8,380,000          6,688,000
                                                                        ---------         ---------          ---------
 OTHER INCOME:
    Interest                                                              143,000           227,000            216,000
                                                                          -------           -------            -------
 ----------------------------------------------------------------------------------------------------------------------
         INCOME BEFORE INCOME TAXES                                     9,684,000         8,607,000          6,904,000
                                                                        ---------         ---------          ---------
 PROVISION FOR INCOME TAXES (NOTE 7)                                    3,901,000         3,336,000          2,704,000
                                                                        ---------         ---------          ---------
 ----------------------------------------------------------------------------------------------------------------------
 NET INCOME                                                          $  5,783,000      $  5,271,000       $  4,200,000
                                                                     ------------      ------------       ------------
 ======================================================================================================================
 NET INCOME PER COMMON SHARE:
    Basic                                                            $       1.04      $        .96       $        .77
                                                                     ------------      ------------       ------------
    Diluted                                                          $       1.01      $        .91       $        .75
                                                                     ------------      ------------       ------------
 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
    Basic                                                               5,545,953         5,516,689          5,444,035
                                                                       ----------         ---------          ---------
    Diluted                                                             5,738,267         5,791,911          5,615,414
                                                                       ----------         ---------          ---------
 ======================================================================================================================

</TABLE>
                                 See accompanying summary of accounting policies
                                 and notes to consolidated financial statements.






                                      F-5
<PAGE>


<TABLE>
<CAPTION>
                                                                                                NATIONAL HOME HEALTH CARE CORP.
                                                                                                               AND SUBSIDIARIES


                                                                     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY




                                                Common Stock                                                  Treasury Stock
                                         -------------------------                                    ------------------------------
                                                                         Additional         Retained
                                             Shares        Amount      Paid-in Capital       Earnings      Shares          Amount
------------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>              <C>          <C>            <C>               <C>          <C>
Balance, July 31, 2000                      6,228,746        $6,000       $18,525,000    $12,274,000       1,276,778    $(2,319,000)
Net income                                          -             -                 -      4,200,000               -               -
Stock dividend declared March 16, 2002        245,983             -         1,690,000     (1,690,000)              -               -
Exercise of stock options                      16,500             -            69,000              -               -               -
Tax benefit of stock option exercise                -             -            22,000              -               -               -
Acquisition of treasury shares                      -             -                 -              -          33,901       (193,000)
------------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2001                      6,491,229         6,000        20,306,000     14,784,000       1,310,679     (2,512,000)
Net income                                          -             -                 -      5,271,000               -               -
Stock divided declared April 17, 2003         264,211         1,000         4,216,000     (4,216,000)             -               -
Exercise of stock options                     147,379             -           554,000              -               -               -
Tax benefit of stock option exercise                -             -           476,000              -               -               -
Acquisition of treasury shares                      -             -                 -              -          19,300       (207,000)
------------------------------------------------------------------------------------------------------------------------------------
Balance, July 31, 2002                      6,902,819         7,000        25,552,000     15,839,000       1,329,979     (2,719,000)
Net income                                          -             -                 -      5,783,000               -               -
Exercise of stock options                       1,000                           4,000              -               -               -
Acquisition of treasury shares                      -             -                 -              -          77,592       (600,000)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE, JULY 31, 2003                      6,903,819        $7,000       $25,556,000    $21,622,000       1,407,571    $(3,319,000)
====================================================================================================================================
</TABLE>
See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.






                                      F-6
<PAGE>


<TABLE>
<CAPTION>
                                                                                   NATIONAL HOME HEALTH CARE CORP.
                                                                                                  AND SUBSIDIARIES


                                                                             CONSOLIDATED STATEMENTS OF CASH FLOWS


 Years ended July 31,                                                         2003             2002              2001
 ----------------------------------------------------------------------------------------------------------------------
 CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                   <C>               <C>                <C>
    Net income                                                         $ 5,783,000      $ 5,271,000       $ 4,200,000
 ----------------------------------------------------------------------------------------------------------------------
    Adjustments to reconcile net income to net cash provided by
       operating activities:
         Depreciation and amortization                                     884,000          813,000         1,194,000
         Allowance for possible losses, net of write-offs                   69,000          174,000           192,000
         Deferred income taxes                                             272,000                -          (306,000)
         Unrealized loss on investments                                     13,000           49,000                 -
         Loss on sale of assets                                                  -                -            31,000
         Tax benefit realized from the exercise of stock options                 -          476,000            22,000
         Changes in assets and liabilities:
               Accounts receivable                                      (2,392,000)        (573,000)         (328,000)
               Prepaid expenses and other                                 (118,000)         354,000          (634,000)
               Income taxes receivable                                     368,000         (259,000)         (141,000)
               Accounts payable and accrued expenses                      (324,000)         313,000         1,065,000
               Estimated third-party payor settlements                    (156,000)        (178,000)          958,000
               Deferred revenue                                            120,000           58,000           282,000
 ----------------------------------------------------------------------------------------------------------------------
               NET CASH PROVIDED BY OPERATING ACTIVITIES                 4,519,000        6,498,000         6,535,000
 ----------------------------------------------------------------------------------------------------------------------
 CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of furniture, equipment and leasehold improvements           (306,000)        (185,000)         (470,000)
    Purchase of assets of businesses                                    (4,706,000)        (335,000)       (1,737,000)
    Others                                                                       -          (66,000)           22,000
 ----------------------------------------------------------------------------------------------------------------------
               NET CASH USED IN INVESTING ACTIVITIES                    (5,012,000)        (586,000)       (2,185,000)
 ----------------------------------------------------------------------------------------------------------------------
 CASH FLOWS FROM FINANCING ACTIVITIES:
    Purchase of treasury stock                                            (600,000)        (207,000)         (193,000)
    Proceeds from exercise of stock options                                  4,000          554,000            69,000
 ----------------------------------------------------------------------------------------------------------------------
               NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES        (596,000)         347,000          (124,000)
 ----------------------------------------------------------------------------------------------------------------------
 Net increase (decrease) in cash and cash equivalents                   (1,089,000)       6,259,000         4,226,000
 Cash and cash equivalents, beginning of year                           15,341,000        9,082,000         4,856,000
 ----------------------------------------------------------------------------------------------------------------------
 Cash and cash equivalents, end of year                                $14,252,000      $15,341,000       $ 9,082,000
 ======================================================================================================================
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid for:
       Interest                                                        $    20,000      $    13,000       $     1,000
       Income taxes                                                    $ 3,261,000      $ 3,119,000       $ 3,129,000
 ======================================================================================================================
</TABLE>
See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.



                                      F-7
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

BUSINESS                      National Home Health Care Corp.  and  Subsidiaries
                              (the  "Company") is a provider of home health care
                              services,  including nursing care,  personal care,
                              supplemental staffing and other specialized health
                              services in the North  Eastern  part of the United
                              States.


PRINCIPLES OF CONSOLIDATION   The consolidated  financial statements include the
                              accounts  of National  Home Health Care Corp.  and
                              its  wholly-owned  subsidiaries.  All  significant
                              intercompany  balances and transactions  have been
                              eliminated   in   the    consolidated    financial
                              statements.


REVENUE  RECOGNITION  AND     Net patient revenues are recorded at estimated net
ALLOWANCE FOR POSSIBLE        realizable  amounts  from  patients,   third-party
LOSSES                        payors  and  others  for  services   rendered  and
                              includes estimated retroactive revenue adjustments
                              relating   to   future    audits,    reviews   and
                              investigations. Estimated adjustments are recorded
                              as  reviews  are   completed.   An  allowance  for
                              possible    losses   is   recorded    based   upon
                              management's   evaluation   of  current   industry
                              conditions,  historical  collection experience and
                              other relevant  factors  which,  in the opinion of
                              management,  require recognition in estimating the
                              allowance.

                              Under Medicaid,  Medicare and other  reimbursement
                              programs,  the Company is reimbursed  for services
                              rendered to covered program patients as determined
                              by  reimbursement  formulas  and  regulations.  To
                              date,   the  Company  has  not  had  any  material
                              adjustments to previously  recorded amounts.  Laws
                              and  regulations   governing  these  programs  are
                              complex  and  subject  to  interpretation.   As  a
                              result,  it is possible  that  recorded  estimates
                              will change.

                              The Company is  reimbursed  by  Medicare  based on
                              episodes of care. An episode of care is defined as
                              a length of care up to sixty  days  with  multiple
                              continuous  episodes  allowed.   Deferred  revenue
                              represents  the  unearned  cash  received  from an
                              episode of care.



                                      F-8
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

REVENUE  RECOGNITION  AND     Approximately  47%,  50%  and  51% of net  patient
ALLOWANCE FOR POSSIBLE        revenue for the fiscal  years ended July 31, 2003,
LOSSES (CONTINUED)            2002 and 2001,  respectively,  were derived  under
                              federal   and  state   third-party   reimbursement
                              programs.

CASH AND CASH EQUIVALENTS     For the purposes of the  statements of cash flows,
                              the Company considers all highly liquid investment
                              instruments  purchased  with a  maturity  of three
                              months or less to be cash equivalents.


FURNITURE, EQUIPMENT          Furniture,  equipment and  leasehold  improvements
AND LEASEHOLD                 are stated at cost. Depreciation is being provided
IMPROVEMENTS                  on the  straight-line  method  over the  estimated
                              useful lives of the assets  (generally five to ten
                              years).  Amortization of leasehold improvements is
                              being  provided on the  straight-line  method over
                              the various lease terms or estimated useful lives,
                              if shorter.

GOODWILL                      In August 2001, the Company  adopted SFAS No. 141,
                              "Business Combinations" and No. 142, "Goodwill and
                              Intangible  Assets." SFAS No. 141 requires the use
                              of the purchase method of accounting and prohibits
                              the  use of  the  pooling-of-interests  method  of
                              accounting  for  business  combinations  initiated
                              after June 30,  2001.  SFAS No. 141 also  requires
                              that the  Company  recognize  acquired  intangible
                              assets   apart  from   goodwill  if  the  acquired
                              intangible assets meet certain  criteria.  It also
                              requires,  upon adoption of SFAS No. 142, that the
                              Company  reclassify,  if  necessary,  the carrying
                              amounts of intangible assets and goodwill based on
                              the criteria of SFAS No. 141.

                              SFAS No. 142 requires,  among other  things,  that
                              companies no longer amortize goodwill, but instead
                              test goodwill for impairment at least annually. In
                              addition,  SFAS No. 142 requires  that the Company
                              identify   reporting  units  for  the  purpose  of
                              assessing    potential   future   impairments   of
                              goodwill,  reassess  the  useful  lives  of  other
                              existing  recognized  intangible  assets and cease
                              amortization   of   intangible   assets   with  an
                              indefinite   useful  life.  No   adjustments   for
                              impairment losses were required.



                                      F-9
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

GOODWILL (CONTINUED)          The Company's previous business  combinations were
                              accounted for by using the purchase method and, as
                              of  August  2001,  the  net  carrying   amount  of
                              goodwill  from  prior  purchase  transactions  was
                              approximately $7.2 million. Annual amortization of
                              this amount, which ceased effective August 1, 2001
                              amounted to approximately $0.4 million in the year
                              ended July 31, 2001.

                              The effect of adoption of SFAS No. 142 on the 2001
                              consolidated   results  of   operations   were  as
                              follows:

<TABLE>
<CAPTION>
                                                                                                           2001
                               ---------------------------------------------------------------------------------
                                <S>                                                                  <C>
                               Reported net income                                                   $4,200,000
                                 Add back:  Amortization of goodwill, net of taxes                      325,000
                               ---------------------------------------------------------------------------------
                               Net income, as adjusted                                               $4,525,000
                               =================================================================================

                               Basic earnings per share:
                                 Reported net income                                                       $.77
                                 Amortization of goodwill, net of taxes                                     .06
                               ---------------------------------------------------------------------------------
                               Basic earnings per share, as adjusted                                       $.83
                               =================================================================================
                               Diluted earnings per share:
                                 Reported net income                                                       $.75
                                 Add back:  Amortization of goodwill, net                                   .06
                               of taxes
                               ---------------------------------------------------------------------------------
                               Diluted earnings, per share, as adjusted                                    $.81
                               =================================================================================
</TABLE>


NET INCOME PER COMMON         Basic net income per share is computed by dividing
SHARE                         income  available  to common  shareholders  by the
                              weighted-average    number   of   common    shares
                              outstanding.  Diluted  earnings per share reflect,
                              in periods  in which they have a dilutive  effect,
                              the impact of common shares issuable upon exercise
                              of stock options.






                                      F-10
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

NET INCOME PER COMMON         The  reconciliation  for the years  ended July 31,
SHARE (CONTINUED)             2003, 2002 and 2001 are as follows:



<TABLE>
<CAPTION>
                              Years ended July 31,                         2003          2002           2001
                              -----------------------------------------------------------------------------------
                                                                          SHARES        Shares         Shares
                              -----------------------------------------------------------------------------------
<S>                                                                       <C>           <C>            <C>
                              Average number of shares outstanding        5,545,953     5,516,689      5,444,035
                              Effect of dilutive securities - common
                                 stock options                              192,314       275,222        171,379
                              -----------------------------------------------------------------------------------
                              Diluted shares outstanding                  5,738,267     5,791,911      5,615,414
                              ====================================================================================
</TABLE>

                              The number of options that were  anti-dilutive and
                              excluded from the  computation for the years ended
                              July 31, 2003 and 2002 were 183,750 and 0 for July
                              31, 2001.


FAIR VALUE OF FINANCIAL       The carrying amount  reported in the  consolidated
INSTRUMENTS                   balance  sheets  for  cash,  accounts  receivable,
                              accounts payable and accrued expenses  approximate
                              fair value  because of the immediate or short-term
                              maturity of the financial instruments.


ESTIMATED  THIRD-PARTY        The amount  represents  overpayments  from certain
PAYOR SETTLEMENT              third-party  payors. The Company  anticipates that
                              the  third-party  payor will recoup these funds in
                              subsequent periods.

USE OF ESTIMATES              The   preparation   of  financial   statements  in
                              conformity  with  generally  accepted   accounting
                              principles  requires  management to make estimates
                              and assumptions  that affect the reported  amounts
                              of  assets  and  liabilities  at the  date  of the
                              financial  statements and the reported  amounts of
                              revenues and expenses during the reporting period.
                              Actual results could differ from those  estimates.
                              Such  estimates  relate  primarily to  third-party
                              payor  settlements  and  valuation   reserves  for
                              accounts receivable.



                                      F-11
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

WORKERS' COMPENSATION         The Company  self-insures  up to specified  limits
                              certain  risks  related to  workers'  compensation
                              liability.  The  estimated  costs of existing  and
                              expected future claims under the insurance program
                              are accrued based upon  historical loss trends and
                              may be subsequently  revised based on developments
                              relating to such claims.

INCOME TAXES                  The  Company  accounts  for income  taxes under an
                              asset and  liability  approach  that  requires the
                              recognition of deferred tax assets and liabilities
                              for the expected future tax consequences of events
                              that  have  been   recognized   in  the  Company's
                              financial statements or tax returns. The effect on
                              deferred tax assets and  liabilities of changes in
                              tax rates will be  recognized as income or expense
                              in the period that  includes the  enactment  date.
                              The Company files a  consolidated  Federal  income
                              tax return with its subsidiaries.

LONG-LIVED ASSETS             Long-lived  assets,  such  as  intangible  assets,
                              furniture,  equipment and leasehold  improvements,
                              are  evaluated  for  impairment   when  events  or
                              changes  in   circumstances   indicate   that  the
                              carrying   amount  of  the   assets   may  not  be
                              recoverable through estimated  undiscounted future
                              cash flows from the use of these assets.  When any
                              such impairment exists, the related assets will be
                              written down to fair value.


STOCK BASED COMPENSATION      As of July 31, 2003, the Company has a stock-based
                              employee  compensation plan, which is described in
                              Note 9. As allowed by SFAS 148, the  Company,  has
                              elected not to use one of the alternative  methods
                              of transition  available for a voluntary change to
                              the fair  value  based  method of  accounting  for
                              stock-based employee compensation.


                                      F-12
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

STOCK BASED COMPENSATION      All stock  options  have been granted to employees
(CONTINUED)                   and  non-employees  at exercise prices equal to or
                              in excess of the  market  value on the date of the
                              grant.

                              The Company  applies  APB Opinion 25,  "Accounting
                              for  Stock  Issued  to  Employees,"   and  related
                              Interpretations in accounting for its stock option
                              plan by  recording  as  compensation  expense  the
                              excess of the fair market value of the  underlying
                              common stock over the exercise  price per share as
                              of the date of grant.  Because the exercise  price
                              of the Company's employee stock options equals the
                              market price of the  underlying  stock on the date
                              of grant, no compensation was recognized.

                              SFAS No. 123  requires  the Company to provide pro
                              forma  information  regarding  net  income and net
                              income per share as if  compensation  cost for the
                              Company's stock option plan had been determined in
                              accordance   with  the  fair  value  based  method
                              prescribed in SFAS No. 123. The Company  estimates
                              the fair value of each  stock  option at the grant
                              date by  using  the  Black-Scholes  option-pricing
                              model   with  the   following   weighted   average
                              assumptions used for grants since 1992:

<TABLE>
<CAPTION>
                              Years ended July 31,                           2003          2002          2001
                              ---------------------------------------------------------------------------------
                              ASSUMPTIONS
<S>                                                                                      <C>
                                 Dividend Yield                              -            0.00%          -
                                 Volatility                                  -           66.00%          -
                                 Risk free interest rate                     -            5.04%          -
                                 Expected lives                              -         10 years          -
                              =================================================================================
</TABLE>



                                      F-13
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

STOCK BASED COMPENSATION      Under the accounting  provisions of FASB Statement
(CONTINUED)                   123, the  Company's  net income and net income per
                              share  would have been  adjusted  to the pro forma
                              amounts indicated below:

<TABLE>
<CAPTION>
                              Years ended July 31,                          2003           2002           2001
                              ---------------------------------------------------------------------------------
                              PRO FORMA RESULTS
                                 Net income:
<S>                                                                   <C>            <C>            <C>
                                    As reported                       $5,783,000     $5,271,000     $4,200,000
                                    Pro forma                                (a)      5,050,000            (a)
                                 Income per common share-basic:
                                      As reported                           1.04           0.96           0.77
                                      Pro forma                              (a)           0.92            (a)
                                 Income per common share-diluted:
                                      As reported                           1.01           0.91           0.75
                                      Pro forma                              (a)           0.87            (a)
                              =================================================================================
                               (a) No pro forma since options were not granted.
</TABLE>


SEGMENTS                      The Company's management considers its business to
                              be a single  segment - Home  Healthcare  Services.
                              Home  Healthcare  Services net patient  revenue is
                              provided  by  health  care   personnel,   and  the
                              Company's customers are similar for all sources of
                              net  patient  revenue.  Management  evaluates  its
                              operating results on an integrated basis.


RECLASSIFICATIONS             Certain  reclassifications have been made in prior
                              years'   financial   statements   to   conform  to
                              classifications used in the current year.




                                      F-14
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

RECENT ACCOUNTING             In  January   2003,   the   Financial   Accounting
PRONOUNCEMENTS                Standards Board ("FASB") issued Interpretation No.
                              46,  Consolidation of Variable Interest  Entities.
                              The objective of this interpretation is to provide
                              guidance  on how to  identify a variable  interest
                              entity  (VIE)  and  determine   when  the  assets,
                              liability,   and  non-controlling   interests  and
                              results  of  operations  and  a  VIE  need  to  be
                              included  in a  Company's  consolidated  financial
                              statements. A company that holds variable interest
                              in an entity will need to  consolidate  the entity
                              if the  Company  interest  in the VIE is such that
                              the  Company  will  absorb a majority of the VIE's
                              expected  losses and/or  receive a majority of the
                              entity's expected residual returns, if they occur.
                              Interpretation  No.  46 also  requires  additional
                              disclosures  by  primary  beneficiaries  and other
                              significant   variable   interest   holders.   The
                              provisions of this interpretation became effective
                              upon issuance. The adoption of this interpretation
                              did not have a  material  effect on the  Company's
                              consolidated financial statements.

                              In  November   2002,   the  FASB  issued  FIN  45,
                              "Guarantor's     Accounting     and     Disclosure
                              Requirements  for Guarantees,  Including  Indirect
                              Guarantees  of   Indebtedness   of  Others."  This
                              interpretation  expands the disclosures to be made
                              by a guarantor in its financial  statements  about
                              its  obligations  under  certain   guarantees  and
                              requires the guarantors to recognize the liability
                              for the fair value of an obligations assumed under
                              a guarantee.  FIN 45 clarifies the requirements of
                              SFAS  No.  5,   "Accounting   for   Contingencies"
                              relating to guarantees. In general, FIN 45 applies
                              to contracts or  indemnification  agreements  that
                              contingently   require  the   guarantor   to  make
                              payments to the guaranteed  party based on changes
                              in an  underlying  that is  related  to an  asset,
                              liability,  or equity  security of the  guaranteed
                              party.  Certain  guarantee  contracts are excluded
                              from   both   the   disclosure   and   recognition
                              requirements  of this  interpretation,  including,
                              among  others,  guarantees  relating  to  employee
                              compensation,   residual  value  guarantees  under
                              capital lease arrangements,  commercial letters of
                              credit, loan commitments,  subordinated  interests
                              in a special purpose  entity,  and guarantees of a
                              company's own future performance.



                                      F-15
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

RECENT ACCOUNTING             Other  guarantees  are  subject to the  disclosure
PRONOUNCEMENTS (CONTINUED)    requirements  of FIN 45 but not to the recognition
                              provisions and include,  among others, a guarantee
                              accounted  for as a  derivative  instrument  under
                              SFAS No. 133, a parent's guarantee of debt owed to
                              a third party by its subsidiary or vice-versa, and
                              a  guarantee  which is based  on  performance  not
                              price.  The disclosure  requirements of FIN 45 are
                              effective for the Company as of December 31, 2002,
                              and  require  disclosure  of  the  nature  of  the
                              guarantee,  the maximum potential amount of future
                              payments that the  guarantor  could be required to
                              make under the  guarantee,  and the current amount
                              of the  liability,  if any,  for  the  guarantor's
                              obligations  under the guarantee.  The recognition
                              requirements   of  FIN   45  are  to  be   applied
                              prospectively  to  guarantees  issued or  modified
                              after  December  31,  2002.  The  adoption of this
                              interpretation  did not have a material  effect on
                              the Company's consolidated financial statements.


                              In May 2003,  the Financial  Accounting  Standards
                              Board ("FASB") issued SFAS No. 150, Accounting for
                              Certain Financial Instruments with Characteristics
                              of  Liabilities  and Equity  ("SFAS 150") which is
                              effective for the interim period  beginning  after
                              June 15, 2003. SFAS 150 establishes  standards for
                              the Company's classification of liabilities in the
                              financial  statements that have characteristics of
                              both liabilities and equity.  The adoption of SFAS
                              150  will  not  have  a  material  effect  on  the
                              Company's financial statements.




                                      F-16
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                                  SUMMARY OF ACCOUNTING POLICIES
--------------------------------------------------------------------------------

RECENT ACCOUNTING             In December 2002,  the FASB  issued SFAS  No. 148,
PRONOUNCEMENTS (CONTINUED)    "Accounting    for    Stock-Based    Compensation-
                              Transition and Disclosure".  This statement amends
                              SFAS  No.   123,   "Accounting   for   Stock-Based
                              Compensation"  and provides  alternate  methods of
                              transition for an entity's voluntary change to the
                              fair value method of  accounting  for  stock-based
                              employee compensation". This statement also amends
                              the  disclosure  requirement  of SFAS  No.  123 to
                              require more  prominent  disclosure  and specifies
                              the   form,   content   and   location   of  those
                              disclosures  in both annual and interim  financial
                              statements regarding the method of accounting used
                              for  stock-based  employee  compensation  and  its
                              effect on  reported  results.  This  statement  is
                              effective  for fiscal years ending after  December
                              15,  2002.  The Company  continues  to account for
                              employee  stock-based  compensation  under APB 25,
                              and did not make a  voluntary  change  to the fair
                              value based method of accounting  for  stock-based
                              employee   compensation   under   SFAS   No.   123
                              accordingly,  the adoption of SFAS No. 148 did not
                              have a material impact on the Company's  financial
                              position or results of operations.

                              In July  2002,  the  FASB  issued  SFAS  No.  146,
                              "Accounting  for  Costs  Associated  with  Exit or
                              Disposal   Activities"   ("SFAS  146").  SFAS  146
                              addresses  financial  accounting and reporting for
                              costs associated with an exit or disposal activity
                              and requires such costs to be recognized  when the
                              liability is incurred.  Previous  guidance in EITF
                              No.  94-3,  "Liability   Recognition  for  Certain
                              Employee  Termination  Benefits and Other Costs to
                              Exit an  Activity  (Certain  Costs  Incurred  in a
                              Restructuring)"  ("EITF  94-3"),  require  that  a
                              liability for an exit cost be recognized at a date
                              of a  company's  commitment  to an exit plan.  The
                              provisions  of SFAS 146 are  effective for an exit
                              or disposal  activities  that are  initiated  by a
                              company after  December 31, 2002.  The adoption of
                              SFAS No. 146 did not have a material impact on the
                              Company's   financial   position   or  results  of
                              operations.


                                      F-17
<PAGE>


                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


1.    FURNITURE,              Furniture,  equipment and  leasehold  improvements
      EQUIPMENT AND           are stated at cost and are summarized as follows:
      LEASEHOLD
      IMPROVEMENTS

<TABLE>
<CAPTION>
                              July 31,                                              2003                 2002
                              ---------------------------------------------------------------------------------
<S>                                                                           <C>           <C>
                              Furniture and equipment                         $2,369,000    $      1,924,000
                              Leasehold improvements                             426,000             406,000
                              ---------------------------------------------------------------------------------
                                                                               2,795,000           2,330,000
                              Less accumulated depreciation and
                                amortization                                   1,765,000           1,473,000
                              ---------------------------------------------------------------------------------
                                                                              $1,030,000         $   857,000
                              ---------------------------------------------------------------------------------
</TABLE>

                              Depreciation  expense  in 2003,  2002 and 2001 was
                              $292,000, $267,000 and $238,000, respectively.

2.    GOODWILL                Changes in goodwill are as follows:

<TABLE>
<CAPTION>
                              July 31,                                              2003                 2002
                              ---------------------------------------------------------------------------------
<S>                                                                         <C>             <C>
                              Balance, beginning of year                    $  7,366,000    $      7,166,000
                              Additions                                        3,262,000             200,000
                              ---------------------------------------------------------------------------------
                              Balance, end of year                           $10,628,000          $7,366,000
                              ================================================================================
</TABLE>



                                      F-18
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

3.    OTHER                   Other intangible assets are as follows:
      INTANGIBLE
      ASSETS
<TABLE>
<CAPTION>
                              July 31,                                              2003                 2002
                              --------------------------------------------------------------------------------
                              GROSS CARRYING AMOUNT:
<S>                                                                          <C>            <C>
                                 Covenants not to compete                    $ 1,375,000    $      1,325,000
                                 Patient and other files                       2,796,000           2,796,000
                                 Contracts                                     1,234,000                   -
                              --------------------------------------------------------------------------------
                                                                               5,405,000           4,121,000
                              --------------------------------------------------------------------------------
                              ACCUMULATED AMORTIZATION:
                                 Covenants not to compete                      1,168,000           1,049,000
                                 Patient and other files                       2,026,000           1,666,000
                                 Contracts                                       112,000                    -
                              --------------------------------------------------------------------------------
                                                                               3,306,000           2,715,000
                              --------------------------------------------------------------------------------
                              Balance, end of year                           $ 2,099,000          $1,406,000
                              --------------------------------------------------------------------------------
</TABLE>


                              The aggregate  amortization  expense for the years
                              ended July 31, 2003,  2002 and 2001 was  $591,000,
                              $546,000 and $540,000, respectively.

                              Estimated amortization expense is as follows:

<TABLE>
<CAPTION>
                              Years ended July 31,
                              --------------------------------------------------------------------------------
<S>                           <C>                                                                <C>
                              2004                                                               $   510,000
                              2005                                                                   488,000
                              2006                                                                   242,000
                              2007                                                                   199,000
                              2008                                                                   155,000
                              --------------------------------------------------------------------------------
                                                                                                  $1,594,000
                              ================================================================================
</TABLE>



                                      F-19
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

3.    OTHER                   The remaining weighted-average amortization period
      INTANGIBLE              is as follows:
      ASSETS
      (CONTINUED)

<TABLE>
<CAPTION>
                              Year ended July 31,                                                        2003
                              --------------------------------------------------------------------------------
<S>                                                                                                <C>
                              Covenants not to compete                                             2.16 years
                              Patient and other files                                              2.19 years
                              Contracts                                                            9.91 years
                              --------------------------------------------------------------------------------
                                                                                                   3.04 years
                              ================================================================================
</TABLE>

                                      Other   intangible    assets   are   being
                                      amortized using the  straight-line  method
                                      over a period of three to ten years.


4.    ACCOUNTS                Accounts  payable  and  accrued  expenses  are  as
      PAYABLE AND             follows:
      ACCRUED EXPENSES


<TABLE>
<CAPTION>
                              July 31,                                              2003                2002
                              --------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
                              Trade accounts payable                         $   299,000         $   730,000
                              Accrued employee compensation and
                                benefits                                       2,432,000           2,461,000
                              Other                                              526,000             390,000
                              --------------------------------------------------------------------------------
                                                                              $3,257,000          $3,581,000
                              ================================================================================
</TABLE>


5.    INVESTMENT IN           During  fiscal 1996,  following an initial  public
      SUNSTAR                 offering  and change in  management,  the  Company
      HEALTHCARE,  INC.       held a 37.6%  investment  in  SunStar  Healthcare,
                              Inc.  ("SunStar"),  which was  accounted for under
                              the equity method of accounting.

                              During the fiscal  year ended July 31,  2000,  the
                              Company  sold   259,510   shares  of  SunStar  for
                              $1,602,000, resulting in a gain of $1,602,000.

                              In  February   2000,   SunStar's   sole  operating
                              subsidiary effectively discontinued operations. At
                              July 31, 2003, the Company's ownership  percentage
                              of SunStar  was 21.6% and the  Company's  value of
                              its  investment in SunStar was $0. The Company and
                              certain of its  officers and  directors  have been
                              named  in a class  action  brought  on  behalf  of
                              certain shareholders of SunStar (See Note 10d).



                                      F-20
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

6.    ACQUISITIONS            On August 25, 2000, the Company  acquired  certain
                              assets  of  Health  Force  Owned,   Ltd.  and  its
                              affiliates  for  $1,822,000  in  cash,   including
                              acquisition costs of $42,000. The assets purchased
                              consisted  of patient and other files of $800,000,
                              employee  files  of  $400,000,   covenant  not  to
                              compete of $300,000 and goodwill of $722,000.

                              On September 3, 2002, the Company acquired certain
                              assets of  Medical  Resources,  Inc.  and  related
                              entities  for   $2,623,000   in  cash,   including
                              acquisition costs of $73,000. The assets purchased
                              consisted of contracts  of  $1,235,000,  furniture
                              and   equipment   of  $50,000   and   goodwill  of
                              $1,338,000.

                              On December 14, 2002, the Company acquired certain
                              assets of Mary Baker's Health Care Services,  Inc.
                              for $434,000 in cash, including  acquisition costs
                              of  $14,000.  The assets  purchased  consisted  of
                              furniture and equipment of $20,000 and goodwill of
                              $414,000.

                              On March 17, 2003,  the Company  acquired  certain
                              assets of  Professional  Relief  Nurses,  Inc. for
                              $1,248,000 in cash, including acquisition costs of
                              $98,000.   The  assets   purchased   consisted  of
                              furniture and equipment of $89,000 and goodwill of
                              $1,159,000.

                              The above  acquisitions  have been recorded  using
                              the purchase  method of  accounting.  Accordingly,
                              the results of these operations have been included
                              in   the   accompanying   consolidated   financial
                              statements since the dates of acquisition.

                              The  effects  of  the  above  acquisitions  on the
                              consolidated   results  of  operations   were  not
                              significant.



                                      F-21
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


7.    INCOME TAXES            The  provision  for income taxes is  summarized as
                              follows:
<TABLE>
<CAPTION>
                              Years ended July 31,                     2003             2002            2001
                              --------------------------------------------------------------------------------
                              Current:
<S>                                                               <C>            <C>             <C>
                                 Federal                          $2,805,000     $2,500,000      $2,275,000
                                 State                               824,000        836,000         735,000
                              --------------------------------------------------------------------------------
                                                                   3,629,000      3,336,000       3,010,000
                              Deferred                               272,000              -        (306,000)
                              --------------------------------------------------------------------------------
                                                                  $3,901,000     $3,336,000      $2,704,000
                              ================================================================================
</TABLE>


                              The deferred tax asset consists of the following:

<TABLE>
<CAPTION>
                              July 31,                                                2003               2002
                              --------------------------------------------------------------------------------
                              Current:
<S>                                                                               <C>                <C>
                                  Accrued liabilities and reserves                $375,000           $295,000
                              Long term:
                                  Amortization of intangible assets                163,000            515,000
                              --------------------------------------------------------------------------------
                                                                                  $538,000           $810,000
                              ================================================================================
</TABLE>





                              The  reconciliation  of the  statutory tax rate to
                              the effective tax rate is as follows:

<TABLE>
<CAPTION>
                              Years ended July 31,                         2003          2002          2001
                              --------------------------------------------------------------------------------
<S>                                                                         <C>           <C>           <C>
                              Statutory rate                                34%           34%           34%
                              State and local taxes
                                 (net of federal tax effect)                 6             6             6
                              Federal tax credit                            (1)           (1)           (2)
                              Permanent differences                          -             -             1
                              Other                                          1             -             -
                              --------------------------------------------------------------------------------
                              Effective rate                                40%           39%           39%
                              ================================================================================
</TABLE>



                                      F-22
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

8.    CONCENTRATIONS OF       The Company's  business is with  customers who are
      CREDIT RISK AND         in the  healthcare  industry or with  governmental
      MAJOR CUSTOMERS         agencies.

                              The  Company   provides   temporary   health  care
                              personnel to in-home  patients and  facilities  in
                              the New York City metropolitan area,  Connecticut,
                              New  Jersey  and   Massachusetts.   Credit  losses
                              relating  to  customers   historically  have  been
                              minimal and within management's expectations.

                              At  July  31,   2003,   the   Company   maintained
                              approximately 28% of its cash and cash equivalents
                              with one financial institution.

                              Under  certain   federal  and  state   third-party
                              reimbursement  programs,  the Company received net
                              patient  revenue  of  approximately   $45,565,000,
                              $41,253,000  and  $37,788,000  for the years ended
                              July 31,  2003,  2002 and 2001,  respectively.  At
                              July 31, 2003 and 2002,  the Company had aggregate
                              outstanding  receivables  from  federal  and state
                              agencies    of    $4,048,000    and    $4,621,000,
                              respectively.


9.    STOCK OPTIONS           In 1992,  the Company  adopted an  Employee  Stock
                              Option  Plan  (the  "Plan")  designed  to  provide
                              incentives to key employees  (including  directors
                              and  officers  who  are  key   employees)  and  to
                              non-employee  directors of the  Company.  The Plan
                              authorizes  the  granting  of both  incentive  and
                              non-qualified  stock  options  to  purchase  up to
                              500,000 shares of the Company's  common stock.  As
                              of  August  1,  2002 and July  31,  2003,  318,139
                              shares,  of the  Company's  common stock have been
                              reserved for future  issuance upon the exercise of
                              options  designated at either (i) options intended
                              to constitute  incentive  stock  options  ("ISOs")
                              under  the  Internal  Revenue  Code  of  1986,  as
                              amended,  or (ii) nonqualified  options.  The Plan
                              expired in July of 2002. Options granted under the
                              Plan  expire not more than ten years from the date
                              of grant and vest immediately.


                                      F-23
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

9.    STOCK OPTIONS           In 1999,  the  Company  adopted a second  Employee
      (CONTINUED)             Stock  Plan (the "1999  Plan").  The 1999 Plan was
                              adopted in anticipation of expiration of the Plan.
                              The  1999  Plan  was  also   designed  to  provide
                              incentives to key employees  (including  directors
                              and  officers  who  are  key   employees)  and  to
                              non-employee  directors of the  Company.  The Plan
                              authorizes  the  granting  of both  incentive  and
                              non-qualified  stock  options  to  purchase  up to
                              551,250 shares of the Company's  common stock.  As
                              of July 31, 2003,  529,880 shares of the Company's
                              common   stock  have  been   reserved  for  future
                              issuance.  The  provisions  of the  1999  Plan are
                              consistent   with   the   Plan.    Unless   sooner
                              terminated,  the 1999 Plan will  expire in October
                              2009.  Options  granted under the 1999 Plan expire
                              not more than ten years from the date of grant and
                              vest immediately.


                              A summary  of the  status of the  Company's  stock
                              option plan as of July 31, 2003, 2002 and 2001 and
                              changes  for the years  ending  on those  dates is
                              presented below:

<TABLE>
<CAPTION>
                                                                                                   Weighted
                                                                                                    average
                                                                      Number of     Expiration     exercise
                                                                        shares         date          price
                              ---------------------------------------------------------------------------------
                              <S>                                        <C>       <C>                <C>
                              Options outstanding at July 31, 2000        525,291   2004-2009          $  3.86
                              Options exercised                          (17,325)       -                 3.96
                              ---------------------------------------------------------------------------------
                              Options outstanding at July 31, 2001        507,966   2004-2009             3.85
                              Options exercised                         (153,445)       -                 3.61
                              Options forfeited                           (5,513)       -                 3.65
                              Options granted                             183,750   2004-2011            13.31
                              ---------------------------------------------------------------------------------
                              Options outstanding at July 31, 2002        532,758       -                13.97
                              Options exercised                           (1,000)      2009               3.84
                              ---------------------------------------------------------------------------------
                              OPTIONS OUTSTANDING AT JULY 31, 2003        531,758   2004-2011           $13.97
                              -------------------------------------- ------------- ------------- --------------

                                 Range of     Number        Weighted    Weighted       Number       Weighted
                                                            average
                                                           Remaining    average                     average
                                                          Contractual   exercise                    exercise
                              Exercise Price  Outstanding    Price        price     excercisable     price
                              ---------------------------------------------------------------------------------
                              $         3.60       85,751   0.75 years       $ 3.60        85,751        $ 3.60
                              $         3.66       11,024   5.25 years       $ 3.66        11,024        $ 3.66
                              $  3.84 - 4.22      185,083   5.91 years       $ 4.06       185,083        $ 4.06
                              $         4.34       66,150   3.42 years       $ 4.34        66,150        $ 4.34
                              $13.58 - 14.94      183,750   5.83 years       $14.01       183,750        $14.01
                              =================================================================================
</TABLE>


                                      F-24
<PAGE>
                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


9.    STOCK OPTIONS           The  plan  options  are   exercisable  at  various
      (CONTINUED)             prices,  none of which  were in  excess of 110% of
                              the  fair  market  value of the  Company's  common
                              stock at the date of grant.

                              Data summarizing  year-end options exercisable and
                              weighted  average  fair value of  options  granted
                              during  the years  ended July 31,  2003,  2002 and
                              2001 is shown below:

<TABLE>
<CAPTION>
                              Options Exercisable                            2003          2002           2001
                              ---------------------------------------------------------------------------------
<S>                                                                       <C>           <C>            <C>
                              Options exercisable at year end             531,758       532,758        507,966
                              Weighted average exercise price           $   13.97    $    13.97      $    3.85
                              Weighted average fair value of
                                options granted during the year                 -          9.61              -
                              Weighted average remaining
                                contractual life                       6.07 YEARS    7.07 years     6.98 years
                              ==================================================================================
</TABLE>

10.   COMMITMENTS,            EMPLOYEE SAVINGS AND STOCK INVESTMENT PLAN
      CONTINGENCIES AND
      OTHER MATTERS           Effective January 1, 1999, the Company amended and
                              restated its Employee Savings and Stock Investment
                              Plan   organized   under  Section  401(k)  of  the
                              Internal  Revenue  Code.  Under the amended  plan,
                              employees  may  contribute  up  to  15%  of  their
                              salary,  limited to the maximum  amount  allowable
                              under  federal tax  regulations.  The Company will
                              match   100%  of  the   first  3%  of   employees'
                              contributions and 50% of the next 2% of employees'
                              contributions,    provided   that   the   matching
                              contributions  on behalf of any employee  does not
                              exceed 4% of employees' compensation.  The Company
                              may  also  make  additional  contributions  at its
                              discretion.  An  employee  may  invest in  Company
                              stock and  several  mutual  funds.  The  Company's
                              matching  contributions  for the years  ended July
                              31, 2003,  2002 and 2001 were $653,000,  $617,000,
                              and $495,000, respectively.



                                      F-25
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

10.   COMMITMENTS,            EMPLOYMENT AGREEMENTS
      CONTINGENCIES AND
      MATTERS (CONTINUED)     The Company has  employment  agreements  with five
                              officers,  which expire through  October 31, 2006.
                              The  aggregate   commitment   for  future  salary,
                              excluding  bonuses,  is $3,631,000.  One agreement
                              also provides for increases  based on increases in
                              the  consumer  price index and  additional  annual
                              compensation  based on 4% of  pre-tax  income,  as
                              defined,  in  excess  of  $3,000,000.   Two  other
                              agreements  provide  for  additional  compensation
                              based on 4% and 1% of income from  operations,  as
                              defined, in excess of $3,300,000.

                              Leases

                              The  Company  rents  various   office   facilities
                              through  2008  under  the terms of  several  lease
                              agreements that include escalation clauses.

                              At  July   31,   2003,   minimum   annual   rental
                              commitments under noncancellable  operating leases
                              are as follows:

<TABLE>
<CAPTION>
                              Years ended July 31,
                              -------------------------------------------------------------------------
<S>                           <C>                                                           <C>
                              2004                                                          $1,008,000
                              2005                                                             875,000
                              2006                                                             252,000
                              2007                                                              60,000
                              2008                                                              60,000
                              Thereafter                                                        15,000
                              -------------------------------------------------------------------------
                                                                                            $2,270,000
                              =========================================================================
</TABLE>

                              Rent  expense for the years  ended July 31,  2003,
                              2002  and  2001  was   approximately   $1,110,000,
                              $853,000, and $858,000, respectively.

                              One lease  agreement is with a company  controlled
                              by the Company's  Chairman of the Board.  Net rent
                              expense  under such lease  agreement  approximates
                              $216,000 per year.


                                      F-26
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

10.   COMMITMENTS,            LITIGATION
      CONTINGENCIES AND
      MATTERS (CONTINUED)     The  Company  and  certain  of  its  officers  and
                              directors  have  been  named  as  defendants  in a
                              consolidated  class  action  brought  on behalf of
                              certain  shareholders of SunStar Healthcare,  Inc.
                              ("SunStar").  The lawsuit  asserts alleged acts or
                              omissions, which resulted in misrepresentations or
                              omissions of material  information  concerning the
                              financial  condition of SunStar. In February 2001,
                              the Court  dismissed the complaint and granted the
                              plaintiffs  leave  to  amend.  In  addition,   the
                              lawsuit  alleges  that  the  Company  and  certain
                              directors   exercised  control  over  SunStar.  In
                              October 2001,  the Court  granted the  defendants'
                              motion to dismiss the  complaint  with  prejudice.
                              Plaintiff's did not appeal this decision.

                              In a related action,  the director  defendants are
                              named  in a  case  brought  by the  Department  of
                              Insurance of the State of Florida. The allegations
                              in this action are similar to those alleged in the
                              class  action  lawsuit,   which  was  subsequently
                              dismissed.  Although  the  Company is not named in
                              this action,  the Company intends to indemnify the
                              director   defendants   to  the   fullest   extent
                              permitted  under its by-laws.  On May 7, 2002, the
                              Court granted the director  defendants'  motion to
                              dismiss and granted the plaintiff leave to serve a
                              further amended  complaint.  On July 24, 2001, the
                              plaintiff   served  an   amended   complaint.   On
                              September 24, 2001 the director defendants filed a
                              motion  to  dismiss  the  amended  complaint.   In
                              September  2002,  the  director   defendants  (and
                              certain   other   defendants)   entered   into   a
                              settlement agreement with the plaintiff to resolve
                              this action.  The settlement  agreement,  which is
                              subject to court  approval,  was  approved  by the
                              trial  court  in  October  2002.   The  settlement
                              agreement  did not have any impact on the July 31,
                              2003 consolidated  statement of earnings.  A third
                              party  has  appealed  from the  order of the trial
                              court  which  approved  the  foregoing  settlement
                              agreement.


                                      F-27
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

10.   COMMITMENTS,            In October 2003,  the Company's  Connecticut  Home
      CONTINGENCIES AND       Care  subsidiary  received  a  subpoena  from  the
      MATTERS (CONTINUED)     United  States  Attorney's  Office  in New  Haven,
                              Connecticut.  The  subpoena  seeks  production  of
                              documents in connection with an investigation into
                              possible violations of certain federal health care
                              laws. The records sought by the subpoena relate to
                              the subsidiary's psychiatric nurses.

                              Credit Facility

                              The Company has a $7,500,000  committed  revolving
                              line of credit  facility  (the "credit  facility")
                              with its bank. The credit  facility allows for the
                              Company to borrow up to the  lesser of  $7,500,000
                              or  80% of  eligible  accounts  receivable  at the
                              bank's  prime rate or LIBOR plus 2.5%.  The credit
                              facility  expires on October 23, 2003 and requires
                              the Company to meet  certain  financial  covenants
                              and ratios.  The Company is required to pay a .25%
                              commitment fee on unused amounts. At July 31, 2003
                              and 2002 there was no  outstanding  balance  under
                              the credit facility.


11.   STOCK DIVIDENDS         The  Board   announced   on  April  25,  2002  the
                              declaration of a 5% stock dividend payable May 17,
                              2002 to  shareholders  of record on May 10,  2002.
                              The Board  also  announced  on March 13,  2001 the
                              declaration  of a 5%  stock  dividend  payable  on
                              March 23, 2001 to  shareholders of record on March
                              16, 2001. The basic and diluted  weighted  average
                              number of shares  outstanding  and net  income per
                              share  information for all prior reporting periods
                              have been  restated  to reflect the effects of the
                              stock dividends.


12.   TREASURY STOCK          In April 2003,  the Board of  Directors  increased
                              its annual  program to repurchase its Common Stock
                              from $1,000,000 to $3,000,000.  Purchases would be
                              made  from  time-to-time  in the open  market  and
                              through privately negotiated transactions, subject
                              to general market and other conditions.


                                      F-28
<PAGE>

                                                 NATIONAL HOME HEALTH CARE CORP.
                                                                AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

13.   SUMMARIZED              Presented  below  is a  summary  of the  unaudited
      QUARTERLY  DATA         consolidated  quarterly financial  information for
      (UNAUDITED)             the  years  ended  July  31,  2003  and  2002  (in
                              thousands, except per share data):

<TABLE>
<CAPTION>

                                                                                     2003
                              --------------------------------------------------------------------------------
                               Quarter                                First     Second      Third      Fourth
                              --------------------------------------------------------------------------------
<S>                                                                 <C>        <C>        <C>         <C>
                               Net patient revenue                  $22,939    $24,643    $25,120     $24,533
                              --------------------------------------------------------------------------------
                               Cost of revenue                       14,740     15,956     16,374      16,186
                               General and administrative
                                  expenses                            5,603      5,982      6,020       5,942
                               Amortization of intangibles              140        151        150         150
                               Allowance for possible losses             50         50         75         125
                              --------------------------------------------------------------------------------
                                       Total operating expenses      20,533     22,139     22,619      22,403
                              --------------------------------------------------------------------------------
                               Income from operations                 2,406      2,504      2,501       2,130
                               Interest income                           55         35         31          22
                              --------------------------------------------------------------------------------
                               Income before income taxes             2,461      2,539      2,532       2,152
                               Provision for income taxes               987      1,065      1,038         811
                              --------------------------------------------------------------------------------
                               Net income                          $  1,474   $  1,474   $  1,494    $  1,341
                              --------------------------------------------------------------------------------
                               Net income per common share:
                                 Basic                             $    .26        .26   $    .27    $    .24
                                 Diluted                           $    .26        .26   $    .26    $    .24
                              --------------------------------------------------------------------------------

                                                                                     2002
                              --------------------------------------------------------------------------------
                               Quarter                                First     Second      Third      Fourth
                              --------------------------------------------------------------------------------
                               Net patient revenue                  $20,274    $20,466    $20,620     $20,812
                              --------------------------------------------------------------------------------
                               Cost of revenue                       12,926     12,972     13,081      13,305
                               General and administrative
                                  expenses                            4,824      5,012      5,186       5,645
                               Amortization of intangibles              137        136        136         137
                               Allowance for possible losses            115         65         65          50
                              --------------------------------------------------------------------------------
                                       Total operating expenses      18,002     18,185     18,468      19,137
                              --------------------------------------------------------------------------------
                               Income from operations                 2,272      2,281      2,152       1,675
                               Interest income                           78         44         48          57
                              --------------------------------------------------------------------------------
                               Income before income taxes             2,350      2,325      2,200       1,732
                               Provision for income taxes               936        904        839         657
                              --------------------------------------------------------------------------------
                               Net income                          $  1,414   $  1,421   $  1,361    $  1,075
                              --------------------------------------------------------------------------------
                               Net income per common share:
                                 Basic                             $    .26   $    .26   $    .25    $    .19
                                 Diluted                           $    .25   $    .24   $    .24    $    .18
                              --------------------------------------------------------------------------------

</TABLE>



                                      F-29
<PAGE>

















                              SUPPLEMENTAL MATERIAL













                                      F-30
<PAGE>




REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
   ON SUPPLEMENTAL MATERIAL


The audits  referred  to in our report  dated  October 3, 2003  relating  to the
consolidated  financial  statements  of  National  Home  Health  Care Corp.  and
Subsidiaries,  which is  contained  in Item 8 of this Form  10-K,  included  the
audits of the financial  statement schedule listed in the accompanying  Schedule
II for the years ended July 31, 2003,  2002 and 2001.  This financial  statement
schedule is the responsibility of the Company's  management.  Our responsibility
is to express an opinion on this  financial  statement  schedule  based upon our
audits.

In our  opinion  such  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.



/s/ BDO Seidman, LLP
---------------------------------
BDO Seidman, LLP
Valhalla, New York

October 3, 2003






                                      F-31
<PAGE>



<TABLE>
<CAPTION>

                    Column A                      Column B                         Column C
-------------------------------------------------------------------------------------------------------------
                                                                                   Additions
                                                                  ------------------------------------------
                 Description                 Balance, beginning   Charged to costs and     Charged to other
                                                 of period              expenses          accounts describe
-------------------------------------------------------------------------------------------------------------
<S>                                              <C>                   <C>              <C>
Year ended July 31, 2003:
 Allowance deducted from asset account
 Allowance for possible losses                   $691,000              $300,000         $            -
-------------------------------------------------------------------------------------------------------------
Year ended July 31, 2002:
 Allowance deducted from asset account
 Allowance for possible losses                   $865,000              $295,000         $            -
-------------------------------------------------------------------------------------------------------------
Year ended July 31, 2001:
 Allowance deducted from asset account
 Allowance for possible losses                   $673,000              $670,000         $            -
-------------------------------------------------------------------------------------------------------------


                                                      Column D                Column E
                                             --------------------------------------------------


                                                Deductions describe    Balance, end of period

----------------------------------------------------------------------------------------------
Year ended July 31, 2003:
 Allowance deducted from asset account
 Allowance for possible losses                          $369,000(a)                $622,000
----------------------------------------------------------------------------------------------
Year ended July 31, 2002:
 Allowance deducted from asset account
 Allowance for possible losses                          $469,000(a)                $691,000
----------------------------------------------------------------------------------------------
Year ended July 31, 2001:
 Allowance deducted from asset account
 Allowance for possible losses                          $478,000(a)                $865,000
----------------------------------------------------------------------------------------------

</TABLE>


(a)   Represents actual write-offs.

      See accompanying independent accountants' report on supplemental material.












                                      F-32
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended,  the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                            NATIONAL HOME HEALTH CARE CORP.


                                            /s/ Robert P. Heller
                                            ------------------------------------
                                            By:     Robert P. Heller
                                                    Vice President of Finance
                                                    and Chief Financial Officer

Dated:  October 29, 2003

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  this report has been signed on the above date by the following persons
on behalf of the Registrant and in the capacities indicated.



/s/ Frederick H. Fialkow       October 29, 2003      Chairman of the Board of
---------------------------                          Directors
Frederick H. Fialkow


/s/ Steven Fialkow             October 29, 2003      President, Chief Executive
---------------------------                          Officer, Secretary and
Steven Fialkow                                       Director (principal
                                                     executive officer)


/s/ Robert P. Heller           October 29, 2003      Vice President of Finance,
---------------------------                          Chief Financial Officer and
Robert P. Heller                                     Treasurer (principal
                                                     financial and accounting
                                                     officer)


/s/ Ira Greifer                October 29, 2003      Director
---------------------------
Ira Greifer, M.D.


/s/ Bernard Levine             October 29, 2003      Director
---------------------------
Bernard Levine, M.D.


/s/ Robert Pordy               October 29, 2003      Director
---------------------------
Robert Pordy, M.D.


/s/ Harold Shulman             October 29, 2003      Director
---------------------------
Harold Shulman


                                      -33-
<PAGE>




                          Commission File No. 0-12927




                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    EXHIBITS

                                       to

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
           OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, FOR THE
                         FISCAL YEAR ENDED JULY 31, 2003


                         NATIONAL HOME HEALTH CARE CORP.




                                       34

<PAGE>




EXHIBIT                                 DOCUMENT
NUMBER                                  --------
------

3.1            Certificate of  Incorporation.  Incorporated  by reference to the
               Registrant's  Registration  Statement  on Form S-1 (No.  2-86643)
               filed September 20, 1983 (the "1983 Form S-1").
3.2            Certificate  of  Amendment  to   Certificate  of   Incorporation.
               Incorporated  by reference to the  Registrant's  Annual Report on
               Form 10-K for the fiscal year ended July 31, 1992.
3.3            By-laws. Incorporated by reference to the 1983 Form S-1.
3.4*           Amendment to Article III, Section 3 of By-Laws.
10.1           1992  Stock  Option  Plan.   Incorporated  by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 1993 (the "1993 Form 10-K").
10.2           Incentive  Stock  Option Plan.  Incorporated  by reference to the
               1993 Form 10-K.
10.3           1999  Stock  Option  Plan.   Incorporated  by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 2000.
10.4           Third  Amendment,  dated as of August 1,  2001,  to  Amended  and
               Restated   Employment   Agreement   between  the  Registrant  and
               Frederick   H.   Fialkow.   Incorporated   by  reference  to  the
               Registrant's Annual Report on Form 10-K for the fiscal year ended
               July 31, 2001 (the "2001 Form 10-K").
10.5           Amended and Restated Employment Agreement dated as of November 1,
               2001  between  the   Registrant   and   Frederick   H.   Fialkow.
               Incorporated by reference to the Registrant's Quarterly Report on
               Form 10-Q for the fiscal  quarter  ended  January  31,  2002 (the
               "January 31, 2002 Form 10-Q").
10.6           Fourth  Amendment,  dated as of August  1,  2001,  to  Employment
               Agreement between the Registrant and Steven Fialkow. Incorporated
               by reference to the 2001 Form 10-K.
10.7           Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Steven  Fialkow.  Incorporated by reference to the
               January 31, 2002 Form 10-Q.
10.8           Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Robert P. Heller. Incorporated by reference to the
               January 31, 2002 Form 10-Q.



<PAGE>
EXHIBIT                                 DOCUMENT
NUMBER                                  --------
------

10.9           Employment  Agreement  dated as of November  1, 2001  between the
               Registrant and Richard Garofalo. Incorporated by reference to the
               January 31, 2002 Form 10-Q.
10.10          Amended and Restated Asset Purchase  Agreement  dated October 15,
               1999 among Charles L. Glerum as Trustee for Optimum Care Services
               of Connecticut,  Inc., Optimum Home Health of Connecticut,  Inc.,
               Optimum Home Care of  Connecticut,  Inc.,  New England Home Care,
               Inc.,  Connecticut  Staffing  Works  Corp.  and  the  Registrant.
               Incorporated by reference to the  Registrant's  Current Report on
               Form 8-K dated November 11, 1999.
10.11          The Registrant's Employee Savings and Stock Investment Plan under
               Section  401(k) of the  Internal  Revenue  Code,  effective as of
               January 1, 1999.  Incorporated  by reference to the  Registrant's
               Quarterly  Report  on Form  10-Q  for the  fiscal  quarter  ended
               October 31, 1999.
10.12          Letter  Agreement  dated  February  20, 2000  providing a Secured
               Advised Line of Credit from the Bank of New York to National Home
               Health Care Corp.  Incorporated by reference to the  Registrant's
               Quarterly  Report  on Form  10-Q  for the  fiscal  quarter  ended
               January 31, 2000 (the "January 31, 2000 Form 10-Q").
10.13          Letter  Agreement  dated  February  20, 2000  providing a Secured
               Advised  Line of Credit  from the Bank of New York to New England
               Home Care, Inc. Incorporated by reference to the January 31, 2000
               Form 10-Q.
10.14*         Audit Committee Charter adopted July 17, 2003.
10.15*         Code of Ethics as of October 23, 2003.
21.1*          List of Subsidiaries.
23.1*          Consent of BDO Seidman, LLP.
31.1*          Certification  of  Principal  Executive  Officer  pursuant  to 18
               U.S.C.  Section 1350,  as adopted  pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002.
31.2*          Certification  of  Principal  Financial  Officer  pursuant  to 18
               U.S.C.  Section 1350,  as adopted  pursuant to Section 302 of the
               Sarbanes-Oxley  Act of 2002.


<PAGE>

EXHIBIT                                 DOCUMENT
NUMBER                                  --------
------

32.1*          Certification  of  Principal  Executive  Officer  pursuant  to 18
               U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.

32.2*          Certification  of  Principal  Financial  Officer  pursuant  to 18
               U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002.


----------
*     Filed herewith